Stewart Jackson: How much faith can we have in the Government's ability to tackle climate change when it will be another seven years—that is, 17 years since the Government were first elected—before they achieve full capacity in the most environmentally sustainable system of transport? What sort of record is that?

Mark Lazarowicz: My right hon. Friend has rightly spoken about the benefits of upgrading the west coast main line. Will he look at ways of ensuring that the benefits of that upgrading are felt as widely as possible by improving inter-city rail services between Edinburgh and north-west England, especially Manchester?

Douglas Alexander: A distinction can be drawn between peak-time travel, when the pressure on the network is greatest, and other times, but I assure my hon. Friend that the importance of accommodating not only the commuter and business traveller but leisure travellers and those who want to take bikes on trains is recognised.

Gillian Merron: It appears that the question, if not the process, was too long. If my hon. Friend is referring to "Quality Contracts", the estimate is some 14 to20 months, but we are working closely on that with stakeholders, including PTEs. We will publish a draft timetable alongside the road transport Bill.

Geoffrey Clifton-Brown: In terms of distance from London, the train service to Gloucestershire is one of the worst in the country. To improve the reliability and punctuality of the service—again, it is operated by First Great Western trains—would the Minister support an increase in rail capacity when that is put to him by Network Rail? The company has feasibility money to dual the line from Swindon to Kemble and from Oxford to Worcester Shrub Hill. Will the Minister support those proposals when they come before him?

Brian Jenkins: I congratulate Virgin trains on the remarkable progress that we have made on the west coast line. With luck, next year we will be back to the times that we achieved in the mid-1960s, when the west coast electrified line was first introduced. The one thing that we have not achieved is a programme that serves the users of the west coast line. There are still too few trains that stop to pick up the people at towns such as Tamworth, although many more trains stop at stations down the line that serve smaller populations. Will the Minister look at the way that the timetables are organised there, particularly as that is where the cross-country lines cross the lines that run from the top to the bottom of the country, which means that a hub station should be created at Tamworth?

Neil Turner: I am grateful for that reply. I am sure that the Minister is aware that good transport links are an important factor in stimulating local economies. Will he ensure that there is sufficient capacity in his departmental budget, and in the regional development agency budgets, to make sure that local economiescan be stimulated by new road links to any new developments built in the period that I mentioned?

Stephen Ladyman: I admire the hon. Gentleman's advocacy of that particular road scheme, but I again offer him the advice that I have given him on several occasions: it is necessary for him to win the support of local stakeholders if he is to get the scheme prioritised, so that work on it can start within the time scale that he wants. At the moment, the scheme is prioritised, but it will not happen as quickly as the hon. Gentleman would want. It is for him to go back to regional stakeholders and increase the priority of the scheme. By the bye, it might be a good idea if he and his colleagues supported some of the measures that the Government have put forward to raise the money to pay for the road improvements that he and his colleagues want.

David Clelland: The last time that there was any major investment in the Gateshead A1 western bypass, which runs—or should I say crawls—through my constituency, was more than 20 years ago. When can we expect further investment to bring that important artery up to national standards?

Nicholas Winterton: The Minister said in reply to a supplementary that resources for roads would be allocated fairly across the country. There are many Opposition Members who would think that that was an untruth, but I do not accuse him of telling an untruth to the House. Will he give me an assurance that resources will be allocated fairly and that Conservative authorities such as Macclesfield borough council and Cheshire county council, which have been under-resourced, particularly in east Cheshire will, in future, receive a fair allocation of resources in accordance with the prosperity that they create in Cheshire and the north-west.

Stephen Ladyman: When we decided to go for a regional funding allocation, we began with an open consultation, which included all the regions, local authorities, and Opposition Members, to decide how the money was to be allocated to the regions. We have stuck to that formula, so it is clear that the money has been fairly distributed. I would say to the hon. Gentleman that I have received representations since then from every region in the country saying that they would like to change the system, because they have come up with a system that would benefit their region at the expense of every other region. I am afraid that life is simply not like that, and if we want more money for the regions we must raise more money overall, and that comes down to the hon. Gentleman and the Opposition occasionally supporting the Government in raising that money.

James McGovern: The BBC recently described royal prerogative powers as
	"A series of historic powers, officially held by the Queen, that have, in reality, been passed to politicians."
	Royal prerogative powers allow decisions to be taken without the backing of or consultation with Parliament. Does the Minister agree that in a democracy, decisions taken without the backing of or consultation with Parliament should be illegal? And can we have a review to address that anachronistic anomaly once and for all?

Bridget Prentice: We should be cautious in this field; let me give an example of why that is. We must be careful about introducing legislation in some of these areas where we would then have the undesirability of their being overseen by the courts, which would not necessarily be a good thing. Indeed, it should be for Parliament, rather than the courts, to comment on some of these issues. The Government have to be accountable to Parliament for their decisions, including decisions on the deployment of armed forces. Parliament's rights are therefore fully protected under the existing arrangements. That does not mean to say that the Government are not prepared to look at prerogative powers again. We have done that in the past and we are still prepared to do so. We will continue to listen to views on the subject, although at the moment we see no reason to do anything different from the present situation.

Kelvin Hopkins: I agree most strongly with my hon. Friend the Member for Dundee, West (Mr. McGovern). Would not it be useful for my hon. Friend the Minister to look at other parliamentary democracies, especially those with constitutional monarchies such as our own, to see how they do things and perhaps to make some progressive reforms in the light of that?

Jonathan Djanogly: In response to a written question of mine on 28 March, in regard to postal vote fraud the Under-Secretary said:
	"The Government do not consider there is sufficient justification to make further changes that would restrict the availability of postal voting... as is the case in Northern Ireland."—[ Official Report, 28 March 2007; Vol. 458, c. 1597W.]
	Does the Under-Secretary claim that availability to vote surpasses the integrity of the vote? Is not that Government approach one of extreme complacency?

Bridget Prentice: The hon. Gentleman constantly raises the example of Northern Ireland and I constantly have to remind him that the measures that we took in Northern Ireland meant that registration dropped by more than 10 per cent. Approximately3.5 million people who should be on the register in England and Wales are not. That is a great democratic deficit. It might suit the Conservative party for fewer people to be on the register and able to vote, but it does not suit those of us who believe in democracy.

Ian Liddell-Grainger: I am not offended by having my Bill talked about, Mr. Speaker! In fact, it is a great accolade.
	Information technology has become a get-out—a way of avoiding telling people what is going on.
	I appreciate the dilemma faced by local authorities. Some planning areas are very busy. In Wandsworth, here in London, 30,000 consultation letters were sent last year. However, the obligation actually to do anything is non-existent. The only requirement is for a period of 21 days during which action can be taken. The planning authority has a duty to put up notices, usually in small print on A4 pieces of paper pinned to telegraph poles. One needs a magnifying glass to decipher what they say, and one would have to be a planning anorak to stop and read one in the first place. Bigger developments require a planning authority to buy one tiny advertisement in the local paper, which is usually hidden away on page 99 if it gets that far. There is a woolly commitment to consulting interest groups, residents and—how I hate this word—stakeholders. The politician who coined the word should be made to use a stake himself.
	There are good intentions, but they are not law. Every planning authority can do as much or as little as it likes to keep people posted; no planning authority has any legal obligation to tell people outside their areas what is going on. That means that unless there is a planning application to build a nuclear power station, an airport or a Tesco store, they will not be told. That deficit in the planning process makes a mockery of the existing law, and seriously undermines what has become a major cross-party commitment to be seen to be consulting.
	The Government swear by consultation. Hundreds of different consultations are currently taking place: we need only look at the No. 10 website to see that. Those with strong opinions and ample time should be free to add to debates, but there is one small drawback. Consultation does not involve any debate at all. The public are invited to pour in opinion, which can then be conveniently polarised, twisted or ignored. The scale of the consultation industry is reminiscent of the old maxim "Divide and rule". There are now so many official consultations that it is impossible to keep abreast of any of them. Moreover, the Government have opened up consultation far too widely.
	Consultation involves small complications, but big complications are much more serious. Consultations are voluntary, they are not binding, and no one has a say. There has to be a proper "code of conduct". Imagine what Moses would have said if God had handed him a code of conduct instead of the ten commandments. "Thou shalt not covet thy neighbour's ass" has a better ring to it than "Perhaps we should leave the neighbour's donkey alone".
	Private Members' Bills such as this are designed to establish effective procedures by which all councils must abide. It is no longer good enough to tell people what the council feels that it should be telling them. It must no longer be acceptable to insert a tiny notice in the form of a classified advertisement in the local paper. Under my Bill, the nature of proposals must be crystal clear, and they must be advertised so that people can see notices, understand them and—more important—respond to them. Local authorities will have to go out of their way to let people know what they are doing, and the Bill will specify precisely how far out of their way they will have to go.
	Critics may say that this will cost money. It is necessary merely to amend, not to reinvent the wheel, and paying for the maximum sensible standards will surely save more in the long term. If planners and politicians listen to local opinion first and take action on the basis of what people really want, town halls will get on a great deal better. We can all cite cases from all over the country in which that has not happened. Perhaps the most obvious local example is my own county council, which ill-fatedly put up hundreds of road signs without consulting. The public were upset, and all the signs came down again. That is not good enough.
	The tragedy is that local authorities are not doing anything wrong, but are obeying the law. The Bill spells out what is necessary. It makes sense, and I commend it to the House.
	 Question put and agreed to.
	Bill ordered to be brought in by Mr. Ian Liddell-Grainger, Kelvin Hopkins, Mr. Mark Francois, Rob Marris, Mr. Ben Wallace, Mr. Lindsay Hoyle, Mr. Henry Bellingham and Mr. David Clelland.

George Osborne: Now that the Secretary of State for Environment, Food and Rural Affairs has withdrawn from the Labour leadership race, Labour Members are queuing up to ask the Chancellor's questions in our debates. I will come on to talk about what the hon. Lady and I can do to help those pensioners. Indeed, there is a vote tomorrow in which she can take part.
	I was talking about the Chancellor of the Exchequer, and can I say how pleased we are that Macavity has finally been dragged kicking and screaming out of hiding on the very day when homeowners and pensioners are coming to terms with the latest rise in inflation. Not long ago, the Chancellor was telling the Treasury Committee that he expected
	"inflation to come down significantly over the course of the next few months."
	Today he received a letter from the Governor of the Bank of England explaining why it is rising. Well, the Chancellor never was much of a forecaster.
	Whether in terms of rising inflation, the record tax burden, the billions of pounds that we see being wasted on projects such as the NHS computer system, or that con-trick Budget—or, indeed, the pensions raid—this Chancellor's boast of economic competence is unravelling before our eyes.  [Interruption.] The first, and worst, of all his mistakes was that raid on pensions. When he stands up to respond, let us find out if he can look Britain's pension holders in the eye and say "sorry". One Browne has already done that this week.  [Interruption.] Let us see if another Brown has the courage to do so again today.
	The road to the Chancellor's first and worst stealth tax began, strangely enough, in a hotel room, because the pension tax plans were dreamt up —[ Interruption. ]

George Osborne: The plans for the pension tax raid were, strangely enough, dreamt up in a hotel room. They were dreamt up by the small cabal of the then shadow Chancellor, which included the Economic Secretary, in the penthouse suite of the Grosvenor House hotel, which was taken by the hon. Member for Coventry, North-West (Mr. Robinson), who I see has also brought a copy of his book into the Chamber. He is the Chancellor's former paymaster in more ways than one. It is all there in the hon. Gentleman's memoirs, which are titled "The Unconventional Minister". I guess that unconventional meant that he was bankrolling the Chancellor, and providing Tuscan villas to the Prime Minister and mortgages to Peter Mandelson.
	It is clear from the memoirs that right from the start the tax on pensions was never about encouraging retained profits or increased investment, or any of the other excuses that the Chancellor still peddles. The paymaster says in his book:
	"We needed the money. It had to come from somewhere. We set a target of increasing revenues by £5 billion per annum...There were not many options. If the target was going to be met, then tax credits had to go."
	Of course, they were still in Opposition while the plans were being drawn up—

George Osborne: The right hon. Gentleman has said on several occasions that when Labour came to office, we had one of the strongest pension provisions in Europe. Now we have probably some of the weakest. That was the situation in 1997. The right hon. Member for Birkenhead did not know about the dividend tax changes because, presumably, they were kept secret from him. They have done enormous damage, as I think that he understands—[ Interruption.] It is no good the Chancellor joining in the cheering, as he has not spoken to the right hon. Gentleman for 10 years.

George Osborne: No. I shall get on with my speech and take some interventions later.
	The Chancellor and the man who is now Economic Secretary dropped their tax bombshell onto the laps of Treasury civil servants the day after the 1997 general election. Their advice was clear, and we know the truth thanks to the two-year campaign undertaken by  The Times. I congratulate that newspaper on its efforts, which it maintained despite the costs incurred.
	The Chancellor should be condemned for his efforts to stop that campaign. Indeed, I hope that he will be able to confirm something that a member of the Government told me privately yesterday—[ Interruption.] I can tell the House that someone in my job gets quite a lot of advice about the Chancellor from members of the Government.
	Yesterday, I was told that the documents were finally released only because the Permanent Secretary to the Treasury refused to go on funding the legal costs involved in blocking their release.[ Hon. Members: "Oh!"] As I said, I hear many stories from Labour Members about the Chancellor. When the right hon. Gentleman responds to the debate, perhaps he will confirm the truth of that story.
	In the end, the Chancellor was forced to release the documents. However, he did so very late on the Friday afternoon after the House had begun its Easter recess. The Government have made a habit of burying bad news, but that was one of their shabbiest attempts, and I am pleased to say that it failed spectacularly.
	We can now see the Treasury advice, and understand why the Chancellor was so desperate to conceal it from the public. In its submissions to the Chancellor in May and June 1997, the Inland Revenue warned that
	"abolishing tax credits would make a big hole in pension scheme finances"
	and that
	"the change would lead to a reduction in pension benefits for the lower paid"—
	the same people whom he had just hit with his Budget. The Revenue also told the Chancellor that
	"any loss of pension could be difficult for someone on a small income to cope with",
	and it advised him that
	"everyone in a money purchase scheme is a potential loser."
	Officials at the Inland Revenue ended up by saying that they did not imagine that the Chancellor would want them
	"to consult the DSS before Budget Day."
	On that note, may I welcome the Secretary of State for Work and Pensions, whose private views about the Chancellor are now so public?
	Of course, when Labour Members listened to the Chancellor make his 1997 Budget speech at the Dispatch Box, none of them could have guessed that when he promised to undertake a long-needed reform of company taxation to encourage investment, he meant that he was about to clobber their pensions with a stealth tax worth £5 billion a year.
	That first Budget speech established the reputation for stealth and dishonesty that all the right hon. Gentleman's subsequent 10 Budget speeches have lived up to, and none more so than the con trick that he delivered a month ago.

George Osborne: The Chancellor never told the House of Commons that he was hitting people with a £5 billion tax raid on the pensions. Not once did he tell that.
	Of course, my right hon. Friend the Member for Richmond, Yorks (Mr. Hague), the then Leader of the Opposition did say that abolishing dividend tax credits would mean that
	"pensions will be smaller and pensioners will be worse off."—[ Official Report, 2 July 1997; Vol. 297, c. 306,321.]
	That is of course exactly what has happened. The figures speak for themselves; 60,000 occupational pension schemes have been wound up or, as the right hon. Member for Birkenhead said in the article:
	"five sixths of the final salary schemes that have closed have done so since 2000; in other words, they have closed on our watch".
	Only a third of the remaining final salary schemes are open to new members, and 125,000 people have lost all or most of their pension altogether. I give way to anyone who will vote for that amendment tomorrow.

Judy Mallaber: Did Lord Lamont's special adviser, the right hon. Member for Witney (Mr. Cameron), agree with Lord Lamont when he cut dividend tax credit in 1993 that it distorted the commercial decisions of British companies? Did his special adviser accept and agree with that or not?

George Osborne: Let me make a little progress in my speech. I shall be happy to take lots of interventions because I want the Chancellor to take lots when he speaks, which is not his habit.
	The Chancellor has denied all the damage that has been done. The day after that Budget he said:
	"Pensioners...will not lose out over this."
	Ten years on, he is still peddling that ridiculous line. Tell it to the single parent, working part-time, contributing about £100 a month, who has to increase her annual contributions by £850 to make up the damage caused by the Chancellor's decision, or the young professional— [ Interruption. ] I know Labour Members do not like to hear about those people. Perhaps they are not Labour people any more. A young professional who started her pension plan four years ago and contributes £400 a month will have to work21 months longer, or increase her contributions by almost £1,000 a year, thanks to the Chancellor.
	Rather than acknowledging responsibility, all we have heard from the Chancellor and his cronies is an increasingly desperate string of excuses. They were trotted out by the Economic Secretary on the "Today" programme a fortnight ago. It was a vintage performance. I know that the Chancellor is thinking about who might take his job when he moves next door, as he hopes. The Leader of the House of Commons has his hopes, as does the Secretary of State for Trade and Industry, but I think I speak on behalf of the whole Conservative party when I ask: please may we have the Economic Secretary? We think he is a real vote winner.
	In the "Today" programme interview—the hon. Gentleman's first big test as a Minister—he made a number of extraordinary claims. The first was that the pension funds had been long-term gainers from the new pensions tax.

George Osborne: I want to make some progress.
	That was predicted by David Simon, the chairman of BP, who wrote that abolishing dividend tax credits would
	"reduce funds available for reinvestment"
	and
	"significantly jaundice... the attitudes of investors in UK projects".
	If officials were saying that there would be no overall effect on investment and Ministers were warning of a negative impact, why were the public told that investment would go up? Why?  [Interruption.] The Economic Secretary is peddling another claim that is simply not the case. Business investment as a proportion of GDP has been at a record low.
	Now, Mr. Speaker, we hear a lot of excuses from the Chancellor about his pensions tax. What we never hear is any expression of sympathy for the millions who have had their retirement funds raided.  [Interruption.] Off go the boot boys. As I say, we never hear any expression of sympathy. In Budget after Budget, we hear nothing from the Chancellor about what we can do to restore confidence in pensions and nothing about how to help those who do the right thing.
	Unlike the Chancellor, we are listening to the pensions industry and we are working with British businesses on the tax and regulatory changes that are needed. However, there is something that we can do right now for the 125,000 people who have lost some or all of their pensions because their company went bust. I imagine that every MP has met some of those people in their constituency surgeries: their stories are heartbreaking, their dreams shattered with a lifetime of hard work and saving lost—and all through no fault of their own.
	We know that some of the fault lies with the Government. The parliamentary ombudsman made that clear in talking about "maladministration". The Labour chair of the Public Administration Committee agrees with that verdict. He says that the Government should stop quibbling over this and act to find an acceptable solution for the thousands affected. That is the opinion of the chair of the Public Administration Committee and I agree with him. I believe that all of us, Government and Opposition alike, have a duty to help those people.
	So far, frankly, the help has been inadequate. The Government's financial assistance scheme has cost£9 million to administer, but has paid out just£3 million to date. Even by this Chancellor's standards, that is pretty poor value for money. We need a new approach, an approach that meets our moral obligations to those victims— [Interruption.] Yes, the moral obligation that we all owe to those people. It is an approach that we need to adopt without placing a long-term additional burden on the public exchequer.
	My hon. Friend the shadow pensions Minister has, along with Government Members, tabled amendments to the Pensions Bill, which reports to the House tomorrow. The effect of those amendments would be to create a lifeboat fund for the 125,000 people under the management of the Pension Protection Fund. The lifeboat fund would start making payments immediately to top up pensions to PPF levels—90 per cent. of the total expected pension package. It would include the 6,000 people whose employers remain solvent, but whose pension scheme has gone bust. I agree with the hon. Member for Cardiff, North (Julie Morgan), who may be in the Chamber, although I cannot see her, that it is unjust to leave those unfortunate people facing financial ruin.
	How much would all this cost? According to the e-mail that the Secretary of State for Work and Pensions sent to the parliamentary Labour party and whichwe have a copy of, the net present value cost is£600 million. The annual cash requirement begins at around £30 million, rises to a peak of perhaps three times that in 20 years' time and then falls to zero. To get the money flowing now, the Treasury should make a loan to the lifeboat fund. That is the precedent of what the Government did with Robert Maxwell. The Treasury should then recover the money, on behalf of the fund, from the hundreds of millions of pounds of unclaimed pension assets that the industry itself confirms exist.
	The amendments tomorrow command cross-party support and we will discover today whether they have the support of the Chancellor of the Exchequer. Perhaps he can tell us now. It is time for him to start making amends for the damage that he has done. The Chancellor has made many mistakes in his long time at the Treasury—mistakes that are now coming home to roost. But surely the Chancellor's biggest mistake was his first: his£100 billion raid on the nation's pensions. Why did he do it? As one of my hon. Friends says, we are told that the millions who work hard and save hard for their pension are not his kind of people. In his eyes, their greatest sin is that they want to be independent of the state. In our eyes, that is one of their greatest virtues. For 10 years, the Chancellor has twisted and turned and done everything possible to duck his responsibility and conceal the truth, but the great British pension theft was his crime. The Chancellor has raided the retirement hopes of millions and wrought desolation on the British pension system. We have no confidence in his management of pensions. We have no confidence that he has the answers for the future. Now it is time for him to stand up, face the music, and tell us all that he is sorry.

Gordon Brown: I beg to move, to leave out from 'House' to the end of the Question, and to add instead thereof:
	'notes and welcomes the acts of this Chancellor and Government to tackle the legacy of pensions mis-selling, support occupational pensions through a Pension Protection Fund set up for the first time and anew Pensions Regulator, further support 125,000 people through the Financial Assistance Scheme whose occupational pensions were affected by employer insolvency, set out the long-term framework for pensions through the new Pensions Bill, including re-linking the uprating of the basic State Pension to average earnings, introduce a new scheme of low cost personal accounts and stakeholder pensions of which over three million have been created, remove the dividend tax credit, make reductions in corporation tax which have contributed to the 50 per cent. rise in business investment and helped the UK economy to grow in each of the last 39 quarters and introduce the winter fuel allowance, free television licences and the Pension Credit to provide an additional framework of support for today's pensioners.'.
	I relish this debate. I will answer every question put to me. But as this is a debate about occupational pensions, why did the shadow Chancellor not mention first of all that we are the first Government in history to ensure protection for pensioners when their company goes bust? That was not done by the Conservatives; it was done by Labour—not sympathy, but action. Why did not the shadow Chancellor start by also recognising that, retrospectively, we are helping those employees whose companies have gone bust? That is the means by which we are helping the 125,000 who suffered not because of a dividend tax credit, but because their company went bust. We are also—the shadow Chancellor does not recognise this—the first Government to address seriously the mis-selling of pensions that we inherited from the Conservatives. When we came in in 1997, 2 per cent. of the mis-selling had been dealt with. Within two years, the figure was 98 per cent. That was not done by the Conservatives; it was action by a Labour Government.

Gordon Brown: I will give way in one second.
	The strength of our argument is not just the points that I have made. It is based on the rock of the economy and making the right long-term decisions for the country. It is on the rock of the economy that occupational pensions and any other services in our country depend. I tell the House that I do not apologise for the three long-term decisions that I took in 1997 in the interest of stability and growth in this country: first, to make the Bank of England independent, which was opposed by the Conservatives; secondly, to build a fiscal framework for this country that allowed us to double public investment, which was opposed by the Conservatives; and thirdly, to remove the bias against long-term investment in our economy. That bias was recognised by the previous Chancellor, and, to achieve that, we cut corporation tax by 2p in the pound.
	If the shadow Chancellor wants to cut corporation tax by 2p in the pound, as we did in 1997, why cannot he tell us how he could fund that other than by withdrawing the dividend tax credit? Why does he continue to tell us that he wants more investment in the economy while refusing to back the measures that increased investment in the economy? Why does he tell us that he opposes in principle the withdrawal of the dividend tax credit when his own Government said that it was a bias against investment in 1992 and when he cannot tell us that he would restore it if ever he came to power? Why does he not admit that the Leader of the Opposition was the adviser to Lord Lamont on the fifth occasion on which the dividend tax credit was cut?

Kenneth Clarke: The Chancellor is carefully eliding and shuffling a few dates and events, so may I help him with his recollections? When he was shadowing me as Chancellor, neither of us realised that both of us were looking at the same proposition of a reduction on the tax dividend credit on pensions. In the Treasury, I discussed that proposition with my right hon. Friend the Member for Charnwood (Mr. Dorrell), who was then the Chief Secretary to the Treasury, and in the Grosvenor House hotel, he discussed it with the current Economic Secretary to the Treasury and the hon. Member for Coventry, North-West (Mr. Robinson). We rejected the idea because we were satisfied that it would do damage to occupational pension funds. The Chancellor decided that it would not damage them, and he is still using the preposterous argument that it was responsible for the stock market boom that followed, but I seem to recall that the boom had something to do with the dot.com bubble in the United States. Is he still saying that the Grosvenor House mob came to the right conclusion, and that we came to the wrong one?

Gordon Brown: We have just raised the figure from£2 billion to £8 billion. We have made it possible for every one of the 125,000 people who have lost out to benefit. Is the hon. Gentleman repeating what the shadow Chancellor has said, that there will be no extra funds for pensions, or is he demanding that the shadow Chancellor produce extra funds for pensions? Perhaps Opposition Front Benchers—in particular, the shadow pensions spokesman—will clarify in the course of this afternoon whether they are offering new money or whether they are sticking to the shadow Chancellor's pledge that there will be no new money at all.

Gordon Brown: The right hon. Gentleman had better be careful in joining this debate. He was the author of plans on pensions that virtually lost his party the 1997 election. I have just explained to him that companies paying into pension funds are paying employers' contributions, which rose by £2 billion between 1996 and 1999. It was wrong that so many companies were taking employer holidays, and it was also wrong that the share of wages paid in pension contributions was only between 1 and 2 per cent. Those companies had unfortunately been encouraged to take those holidays by the taxation regime operated by Lord Lawson, which was why those pension funds were not receiving employer contributions as they should have done. Once we made the change, employer contributions started to rise. They have now risen to £33 billion a year, and I hope that the right hon. Gentleman will acknowledge that employers are now paying a fairer contribution to the pensions of their workers. In my 1997 Budget—this is why the shadow Chancellor was completely wrong when he tried to suggest that this was not in the 1999 Budget—I said that employers had been taking holidays for too long and that it was time for them to restore contributions.
	Most sensible people who look at what happened will find that because we cut corporation tax, employers were able to pay more contributions, which rose by£2 billion in that period. At the same time, of course, there were higher dividends, so the effect of the dividend tax credit was wiped out. The whole argument put by the shadow Chancellor this afternoon was dependent on a 7 to 20 per cent. fall in the stock exchange, which was the worst scenario drawn up by Treasury officials. We decided that that would not happen and took the view that the economy would not experience that share cut. We were right and share prices rose—they rose by 12 per cent. in the quarter and by 27 per cent. It is about time that the Opposition, who pride themselves on having some knowledge of economics, understood that because we acted on corporation tax, which they failed to do, we were able to recycle revenues to both pension funds and higher dividends, which meant that the assets and incomes of pension funds rose between 1996 and 1999.

Julie Kirkbride: If the Chancellor feels so confident of his argument, why did he try so hard to have his Treasury officials block the advice that he was given at the time? Will he now answer the question as to whether the permanent secretary blocked further litigation because of the cost?

Gordon Brown: Nearly 3 million pensioners who receive pension credit never received anything from a Conservative Government. If the hon. Gentleman wishes to support pension credit and get it to pensioners in his constituency who do not have it, we will help him do so. However, it is about time Conservative Members stood up and said that they supported the winter fuel allowance, the free television licences, the pension credit and what we have done on pensions—the £11.5 billion.
	In 1997, we made three major changes in the economy. The third was to remove the bias against investment—exactly the proposal that underlined the change that Lord Lamont made in 1992, and the five other changes in dividend tax credit that have taken place. The result of our change was not that the share price fell—it rose. All the figures that the shadow Chancellor gave today are wrong. Investment in the economy rose as a result of the measure. The shadow Chancellor asked about investment earlier: it rose by 10 per cent. in 1997, 20 per cent. in 1998 and is now £40 billion more than it was in 1997—a sign that the economy is working well. Corporate profits also rose as a result of all the changes that we made. We have had—uniquely under any Government—39 quarters of economic growth unbroken by recession.
	Pension assets rose from 1996 to 1999—they did not fall. Pension income rose, not fell, from 1996 to 1999. Pension dividends rose between 1996 and 1999—they did not fall. We made the right decision for the British economy—the right decision for investment, the long-term stability and growth of the British economy and British industry. It is clear today that the Opposition have no alternative to our policy. They would not rescind the dividend tax credit. All they talk about is short-term opportunism—it is insubstantial. Their policies do not add up and they have been exposed in every part of the debate.

Vincent Cable: My colleagues and I intend to vote in favour of the motion. We opposed the abolition of dividend tax credits10 years ago—I personally spoke against it. We believe that the Government made a mistake and that they should acknowledge it. However, the hon. Member for Tatton (Mr. Osborne) helped neither his case nor his credibility by turning the debate into a Punch and Judy show, for two main reasons.
	First, undoubtedly damage was done to money purchase schemes and final salary schemes. However, most of the serious analysis that has been conducted in the City suggests that, though it was a factor, it was not one of the three leading factors that contributed to the demise of final salary schemes, according to Stephen Yeo of Watson Wyatt, who was one of the leading analysts. Abolition was, therefore, a factor, but there is no point in exaggerating it.
	Secondly, as the debate has already shown, the record of the Conservatives in office was not terribly credible. There were acts of omission—the failure to take action on pensions mis-selling—and acts of commission, notably taking action against the so-called over-funding of schemes in the mid-1980s, which the right hon. Member for Birkenhead (Mr. Field) highlighted, and nibbling away at, if not outrightly abolishing, the dividend tax credit through a succession of measures.

Adrian Bailey: I believe that the figure that the hon. Gentleman quoted was for 1997. Was that not a little early to make an accurate assessment? Does he agree that, looking at the stock market, the FTSE has gone up from something like 4,500 in 1997 to 6,500 now, and that the all-company index has gone up from, I think, 2,800 to 3,500? There has been a significant increase in investment and the asset values of companies.

John Redwood: Does the hon. Gentleman accept that the £540 billion combined deficit figure from the actuaries is predicated on wind-up and transfer into bonds, and we happen to be living through a gilt bubble, where prices are very high because of the pension crisis and regulatory pressure to go into bonds? Is not the more accurate deficit for ongoing pension schemes the FRS 17 deficit? Is it not the case that the current cumulative FRS 17 deficit is about the same as the actuaries' figure for the losses as a result of the tax switch?

Vincent Cable: The right hon. Gentleman makes a good point. Others take the view that the FRS criterion is very demanding, but he makes the valid point that we are dealing with a set of assumptions and could come up with different numbers. However, the work in the City suggests that damage was done as a result of the measures but that it was not one of the most important factors. As we are going over the historical record, it is helpful to review what those factors were.
	The first factor was the impact of the tax holidays, which has been discussed. The second was changes in the stock market, to which several hon. Members have referred in different ways. The third was demography. In 1997, the life expectancy of a man coming up to the pension age of 65 was another 19 years. It is now20.5 years. That is an 8 per cent. increase. Consequently, if there were no adjustments to contributions, the pension benefit would fall by 8 per cent., so demography has played an important part. Low interest rates contributed to the problem of annuities, which we have discussed often. One of the other contributory factors was the behaviour of many of the private companies.

Lynne Jones: Does the hon. Gentleman agree that one problem was that the actuarial advice to pension funds did not warn them of longevity increases? Those did not suddenly come about, but happened over a period and should have been catered for for several years before the adjustments were made.

Pete Wishart: I am surprised by the hon. Gentleman's curious defence of the Chancellor andhis policy. It almost seems likely that the Liberal Democrats will tell us next that Bob Maxwell was quite a reasonable guy. Given the hon. Gentleman's response to the Chancellor's speech, can he tell us how he will advise his colleagues to vote this evening?

Vincent Cable: I do not know whether the hon. Gentleman was having a private chat when I began my speech, but I think I said three times that we would support the Opposition motion. I presume from his intervention that he will be doing the same.
	The other key future development in terms of the basic pension architecture that the Government need to get right is to do with personal accounts. We have supported the principle of creating a new mechanism for saving by the low paid and the principle of auto-enrolment, but we are worried that the new scheme could give rise to large-scale mis-selling, intentionally or otherwise. The reason for that is that the new plan is targeted at low-paid workers who might potentially be in receipt of benefit; I understand that about 50 per cent. of the target audience for the new personal accounts are potential recipients of benefit, and particularly pension credit.
	What will happen? There will be a negative interaction between means-tested benefits and the new pension payments. We will have a situation in which some people will face the equivalent of an 85 per cent. marginal rate of tax on their new pension, and many will face a marginal rate of tax of 50 per cent. Many such people would be strongly advised not to take out such personal accounts. Yet one has a sense that the Government are so committed to this scheme that that advice will not be given and that many people will be lured into a scheme that is clearly not in their interests.
	Underlying all of this is the most fundamental point of all: the reason why so many people are on means-tested benefits is that the Government—particularly the Chancellor—have chosen to concentrate all their efforts on improving the pension credit scheme rather than the basic state pension.

John McFall: I am pleased to have been invited to contribute to the debate. Two words are particularly appropriate for it: "hullabaloo" and "hypocrisy". "Hullabaloo" is appropriate because we are debating a decision that was taken10 years ago and on which there was complex and competing counsel. The following question must be asked: what will this debate do for good government and good public policy in the future? Instead of opening up the workings of government as a result of freedom of information legislation, might it encourage Ministers to seek only advice that supports the decision that they want to take? If all civil service advice is prepared with an eye to publication, objections to official policies will not be put in writing and will soon be completely suppressed. I believe that I have support on that point from the right hon. and learned Member for Rushcliffe (Mr. Clarke). It is an important point, which has not yet been raised in today's debate.
	"Hypocrisy" is also a relevant word. If we look at the past record, we find that the previous Conservative Government were making progressive steps towards reducing, if not abolishing, dividend tax credit. I will mention a few of them later. I have also looked at the general press commentary on this issue. John Ralfe is a pension expert and former finance head of Boots. He has said:
	"Anyone who thinks we were living in a pensions nirvana before 1997 needs his head examined."
	He also said:
	"I am not someone who habitually jumps to Brown's defence, but the idea that everything is his fault is baloney."
	Yes, that idea is absolute baloney.
	Stephen Yeo is a senior consultant at Watson Wyatt. He advises the Conservative party, and he said that
	"the cost of pensions has risen due to lower investment returns, the increased cost of security and greater longevity."
	The decision that we are discussing is not among his top three reasons for that rise in cost. The top three reasons are the rise of guaranteed benefits, poor investment returns and greater longevity. For example, today a 65-year-old man is on average expected to live for20 years, as against 12 years in 1950. As a result there has been a revaluation of pension scheme liabilities, which has contributed to the current situation.

Jim Cunningham: Does my right hon. Friend recall that in 2000 some£250 billion was wiped off the stock market, which had a monumental effect on pensions? Most neutral commentators agree with that assessment.

John McFall: That is a very good question, but Conservative Governments reduced the relief five times, from 35 per cent., so some in the hon. Gentleman's party took a different view.
	I said at the start of my speech that these are complex issues and that people have different opinions about them. I was in the City yesterday, and I asked one of the practitioners there about the decision taken 10 years ago. I was told that the market goes up and down on a daily basis, and that decisions must be judged according to whether they achieve their objectives. No one can see 10 years into the future, as the correspondence published in the  Financial Times over the past few weeks demonstrates.
	In a letter dated 3 April, a chartered financial planner named Peter Cave said that we should put the pensions issue into context. He said:
	"Pension funds are rarely invested 100 per cent. in equities, so the tax charge affected only a portion of pension investments: let us suppose a 50:50 split between shares and equities. What is the average dividend in shares? Let us pretend it is...5 per cent. a year".
	That is ambitious in today's environment, but Mr. Cave went on:
	"Then, by stopping the (current) 10 per cent. tax refund, Mr. Brown is stopping 10 per cent. of the 5 per cent., namely0.5 per cent. So the current annual loss to a pension fund, through Mr. Brown's tax change, is 0.5 per cent. on half of the pension fund—namely 0.25 per cent."
	So we are talking about 0.25 per cent. of £1,000 billion, but I can tell the House that, behind closed doors, fund managers can put up their fees just like clicking their fingers and we will know nothing about it. That is how complex the matter is.
	As Chairman of the Treasury Committee, I have been lobbied a lot by industry representatives over the years. They have been concerned about two things: how to restore confidence in the industry so that people on lower incomes get saving again for their pensions, and how we can get people on average salaries of £10,000 to £25,000 to enrol in pension schemes—something that the Government have done a lot to facilitate with their establishment of the national pension saving scheme.
	The Treasury Committee has made its view clear, saying:
	"The long-term savings market is worth £1,900 billion-plus, and its efficient working is vital for the prosperity of both savers and the wider economy. It is widely accepted that there is now a damaging lack of consumer confidence in long-term savings."
	The Committee added that savers need to be given "clear, succinct information" that would reduce the risk of mis-selling.
	The Treasury Committee has also been responsible for establishing a committee comprising industry and consumer group representatives to look forward and plan the pension industry. Richard Lambert, the director of the Confederation of British Industry, was kind enough to be the original chair of the committee. The Treasury Committee's aim was to reach cross-party consensus about the pensions problem, and we made recommendations to the Chancellor about tax and benefits. We said that the present complex tax arrangements needed to be made more coherent to encourage people to save.
	The Pensions Commission set up under Adair Turner agreed, saying that
	"many do not trust the financial services industry to sell good-value products".
	It said that the combined result had been a dramatic growth in the numbers in the private sector work force who do not contribute to a non-state pension from just over 8 million in 1996-97 to nearly 12 million in 2004-05. Lord Turner concluded that
	"the private pension system, far from growing to fill the gap left by the State...is actually doing less."
	As responsible politicians, we must focus on that, on a consensual basis, as otherwise we will not succeed in making improvements. Lord Turner has performed a good service, especially in respect of the auto-enrolment that has been mentioned already, and of the annual management charge.
	Stakeholder pensions were introduced with an annual management charge of 1.3 per cent. They failed because the industry was not attracted by that, and Turner asked for a management fee of 0.3 per cent. If, during the lifetime of a pension the management fee is 1 per cent. more—1.3 per cent. rather than 0.3 per cent., which is a low figure for the industry today—the end result for a worker is that they have 20 per cent. less in their pension. That is one fifth less. So it is important for us to engage in the setting of annual management fees and ensure that the industry brings its costs down. The Secretary of State for Work and Pensions knows that I have been on his back and I will keep on his and other backs on this matter because until we get low fees and competitive charges we shall be doing a disservice to those who save their money on a weekly basis. That is the issue that we should focus on.
	I mentioned the issue of hypocrisy. The dividend tax credit was cut five times in 18 years by the previous Government. Norman Lamont in his 1993 Budget clearly said that it could have damaging economic effects and it distorted the market. He said:
	"It cannot be right to distort the commercial decisions of British companies in this way".—[ Official Report, 16 March 1993; Vol. 221, c. 186.]
	So hon. Members who have addressed the House this afternoon agreed with that Budget, but it seems that they have now turned turtle and they do not agree with the policy. This is where the charge of hypocrisy sticks. If it was okay during 18 years of Conservative rule to reduce dividend tax credits, why are Conservative Members bleating now—particularly those who have a firm ideological viewpoint? The tax credit should be seen as a subsidy, and why should people get a subsidy when other people do not get it?
	The Pensions Commission reserved its real comments for Lord Lawson's Budget and the Finance Act 1988, which forced companies to take contribution holidays. Turner said:
	"indeed not only did contributions fall but they were required to fall by deliberate government policy... the Finance Act of 1986...required pension funds to identify whether...they had a surplus of 5 per cent. or more, and to take action to remove the surplus within five years, or else lose some part of their tax exempt status. The deep dip in contributions seen in the period 1988-91...almost certainly reflects the impact of this policy."
	So we had a perverse situation in which companies paid more tax if they invested in their pension fund, but paid less tax if they paid out a dividend. Surely that was a market-distorting policy. Surely it was for the benefit of the long-term economic future of the United Kingdom to get rid of that policy.
	My right hon. Friend the Member for Rotherham (Mr. MacShane) has written a letter to me. He says that he tried to get it published in  The Economist, but it was refused. It regards the comments of John Moore, who was a Conservative Treasury Minister and has endorsed the release of this information. The letter says that John Moore said to my right hon. Friend that
	"the first thing an incoming Labour government should do would be to switch the tax relief for private pension funds to more worthwhile ends."
	He was a Treasury Minister, a professional accountant, someone who had experience in this House. So I hope that the charge of hypocrisy sticks perhaps only for today and that we get back to the consensual approach to pensions provision.
	So what should we do? First, we need to get back to a consensual approach. We should accept that dividend tax credits distort the market. We should work together to reverse the historic under-investment and short-termism in the British economy. We should also continue on the path of reducing corporation tax. We should provide incentives for investment. I am particularly keen that the Government should provide incentives for those in low-paid work to save for their retirement. We should also recognise the long-term nature of the problems with pensions and get back together, working on a consensual basis to find a solution to a long-term problem.

Kenneth Clarke: I agree with the right hon. Member for West Dunbartonshire (John McFall) that we are making a great hullabaloo about the events of 10 years ago, but there are perfectly good reasons for doing so and for holding this debate. There is an obvious public interest because the Chancellor has delivered his last Budget and is about to become Prime Minister, so the release of the information excited legitimate public questions about his judgment, his style of taking decisions and the consequences of some of the judgments he has made, which may give some clues as to how he might act in future.
	The questions were provoked by the release of information on the decision of the Information Commissioner. The Chancellor says he welcomes the release of such information, although—like the right hon. Member for West Dunbartonshire—I am not sure that I do; I am not sure that we want the form of government in this country to be altered in quite that way. However, it is inevitable that we should have a debate.
	The debate is particularly relevant because the subject is even more important now than it was10 years ago. We all accept that there is something of a pensions and savings crisis and we are all trying to produce long-term consensus on how to resolve it—not for the first time. I was involved in trying to reach consensus with Barbara Castle when she produced proposals that would have practically wiped out private occupational pensions if she had gone ahead.
	The undoubted fact is that if people carry on contributing as little to their savings and their future retirement as they do at present we shall face great problems. We have to form a judgment about recent events, which will include coming to the conclusion that more should be done to encourage people to make their own savings and their own provision and that more should be done to encourage employers to help by trying to rebuild the system and reverse the decline of the occupational pensions industry. That will require continued tax relief—perhaps additional tax relief when it is affordable and even forms of subsidy—so it is important that we consider what the culture should be now. Never again should pensions be regarded as the easy source of revenue that they were in 1997 by the incoming Chancellor. If we can get that point across, the future consensus will be improved.
	I turn to what is still relevant about what happened 10 years ago and will deal briefly with how the announcement was made. The decision was arrived at in great secrecy in opposition and there was no mention of it in the election campaign. It was produced in the Chancellor's first Budget and he read it out in delphic terms; four sentences dismissed the heftiest part of a great increase in the burden of taxation in the 1997 Budget. We had been warned about the windfall tax—another disgraceful tax—but it did not raise enough for the Government, so out of the blue came those remarkable four sentences, ending with:
	"The previous Government cut tax credits paid to funds and companies, so with immediate effect I propose to abolish tax credits paid to pension funds and companies."—[ Official Report, 2 July 1997; Vol. 297, c. 306.]
	It is clear when we read it, but we all know how the Chancellor delivers such things, particularly the difficult bits of Budget speeches. That was the first time.
	The Chancellor's announcement was misunderstood by less sophisticated members of his party. I do not say that critically; things such as tax credits on pension funds are subjects that usually only hold the complete attention of about 20 Members on either side of the House. The Chancellor's statement produced cheers because some Labour Members thought he was announcing a tax reduction and he thought he had got away with it—or so he thought. However, by the next day—3 July, when I spoke in the debate—the Chancellor was angry because  The Times had cottoned on to the full implications. History repeats itself. Only a week or two ago, he had a bad press on the morning following the Budget as people began to analyse what he had done.
	In 1997, the Chancellor announced the original stealth tax. He chose it as a source of revenue partially because he believed that 999 in 1,000 people would not understand the statement he was making, so the money would not appear to come from their pockets. However, by the next day, as the hon. Member for Twickenham(Dr. Cable) said, people were beginning to criticise it. I looked up what I said at the time. Even then, we were talking about the fact that we had been considering but rejecting the same proposal and I said that there would be a profound effect on pension funds, pensioners and employers as a result of that dramatic and unexpected change, for which we were unprepared and which had never been mentioned in the general election eight weeks before.

Kenneth Clarke: That was the argument, but as I have just explained, I do not accept it and I do not think that subsequent history showed that it had that effect. It actually made no significant difference. That argument may have been used even by my predecessors in office, but it has been a convenient excuse to put forward when a Chancellor is looking for revenue.
	Let me move on to how and why the decision was taken. Labour apologists for what happened keep going back to former decisions by my noble Friends Lord Lawson and Lord Lamont, which took place in quite different circumstances. It is relevant to look further into the precise time that we are talking about and the state of the economy then. The three Members I have identified were sitting in that hotel suite at the same time—precisely the same time—that my right hon. Friend the Member for Charnwood (Mr. Dorrell) and myself were looking at the same proposition. We rejected the argument about distributing dividends and the argument that the pensions funds could carry this. It is possible to say that we came to a conclusion that, looking back, was preferable to the one that they reached. I do not believe that, in the end, in any event, that issue is what drove the three new Labour pioneers to the conclusion that they came to.
	I turn to a book that has been cited once already—I thought that my hon. Friend the Member for Tatton (Mr. Osborne) was going to take all my speech when he opened the debate. The book is called "The Unconventional Minister: My Life Inside New Labour" and it is by the hon. Member for Coventry, North-West (Mr. Robinson). I commend it. I am grateful to him for giving me an inscribed copy of the book when he produced it. I am using it only for political criticism of the decision and certainly no kind of personal attack on him or either of his colleagues. He is candid and makes it quite clear that they were searching for revenue. On page 88, when discussing looking at whether the calculations made by Andersen's and being checked by the Treasury were right, he says:
	"We needed the money. It had to come from somewhere".
	That was what actually drove the decision in that first tax-raising Budget in 1997.
	Why did the Government need the money? The main problem was that they had promised not to raise personal taxation. That was a successful electoral ploy and totally robbed me of the best argument that I was hoping to use against them. They were raising the money to fund their youth employment schemes and other measures. That is what it was for. The hon. Gentleman's book reminded me that the windfall tax had been announced to pay for that, but it was not enough.

Kenneth Clarke: The hon. Gentleman is agreeing. Well, it is his own book: it is a good source. The Government had to find some tax that they had not told anybody about in order to fill the shortfall. They may also have suspected that there was a kind of structural deficit and they had to do something about it. He refers to that as well, I think. But the key thing was that the Government believed that they had to raise some money without raising any personal taxation. It had to be corporate taxation and this move was the easiest way because it would raise an astonishing £5 billion per annum—and nobody would understand it apart from a few anoraks in the House and a few people in the pensions and accountancy industry. It was the original, and most profitable, stealth tax. That is how it all emerged.
	A sadness is that the Government turned out not to need the money. It was the beginning of some extremely bad forecasting that they made in subsequent years. They were not able to anticipate where the dotcom bubble in America was going to take us. Nobody did; I did not when I made my remarks about recession. They began to run massive unsolicited and unexpected surpluses. It was years before they needed the money. Sadly, nowadays they are still spending about £6 billion a year and no one can find an easy way of getting out of this continued drain on pension funds.
	They did what they did to raise the money and because it was stealth tax. It did terrible damage to the pensions industry, pensioners and the legitimate expectations of many of our constituents.
	I listened to the Chancellor defending himself and saying what a great decision it was and how he would make it again. He allowed fancy to run away with him. He was plucking things from the air to a quite extraordinary degree. The idea that I had used the argument that we were going to go into recession against him was nonsense. That came when the Governor of the Bank of England was raising interest rates and the Chancellor was raising taxation at precisely the same time, when we were already slowing down the economy. My right hon. Friend the Member for Horsham (Mr. Maude) and I were unlucky: all that happened was that the economy went flat. There were two successive quarters of stagnation. We never went into recession. But that was later.
	Corporation tax was used in mitigation. In my last Budget, I reduced the small companies rate of corporation tax—quite the reverse of what has just been done by the Chancellor. My recollection is that the Government did not cut corporation tax until 1998—and they did not actually cut it. They took the headline rate down by2 per cent., but they altered the method of payment to quarterly on advance estimates so that the cash flow into the Treasury was increased by what they did to corporation tax. It is bizarre to use that excuse. Until very recently, the Labour Government had been raising corporate taxation incessantly during all the time in which they had been in office. The Chancellor then went into even wilder fancies by saying that corporate profits had risen as a result of the decision. I cannot for the life of me understand how corporate profits rose.
	As has been pointed out, the inescapable fact is that the decision, on international financial reporting standards calculations, has cost at least £100 billion over the years. The cost is now running at £6 billion a year. Compared with the previous arrangements, 20 per cent. of the dividend income of pension funds is being sacrificedto the Treasury. Whereas nine out of 10 members of occupational pension schemes were in defined benefit schemes when we left office, only one in 10 is now in a defined benefit scheme. It is estimated that deficits in the pension industry are running at about £100 billion, which is exactly the figure that has been extracted so far by the tax.
	The reaction to this is relevant. The way in which the Chancellor gets carried away by using different time scales to make his points, clutching at figures from the past and making wild assertions about what has happened casts serious doubts on his judgment and where we were going. Yesterday, the Secretary of State for Defence came to the House in almost as big a pickle. He had made a quite appalling error of judgment, but he admitted that he had made a mistake and actually apologised for it. Had he not admitted that he had made a mistake, he would have been roasted alive on the Floor of the House, so he made a sound political judgment. I am afraid that the Chancellor's instincts are totally different. The very fact that he is criticised makes him defend his decision more vigorously by using wild arguments to justify it. He seems oblivious to the fact that although the decision was not the only cause of the problem—there was also longevity, the fall in stock market values and the mad regulation and valuation—he has done great damage to the pensions industry and his judgment was seriously—

Geoffrey Robinson: I am pleased to follow the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke). He started his speech in a serious vein, but he seemed to degenerate into using the unfortunate tone of voice and personalised criticism that we have sadly come to associate with the shadow Chancellor. As I tried to say to the shadow Chancellor last time I commented on his remarks, I do not know why he wishes to demean himself in such a way. The more he personalises his attacks on the Chancellor and makes them as unpleasant as he does, the more his behaviour borders on a form of paranoia and suggests that he lacks self-confidence. If I may offer him some advice—although he seems to have found much in my book, I doubt that he will take this from me across the Chamber—he would do well to moderate the personal nature of his attacks . [ Interruption. ] That remark was meant to be constructive; it was made to the hon. Gentleman in perfectly cordial terms.
	Let me address a couple of points made by the former Chancellor. He makes a great deal of his four-year period as Chancellor. The Opposition often talk about the golden legacy that we inherited in 1997 —[ Interruption. ] Calm, calm. I am prepared to say that we did not find the usual mess left by Tory Governments. However, two significant aspects of the economic situation were of great concern, so we had to address them immediately. The first was the public debt. I have the figures for the former Chancellor, given that he seems to have forgotten them.
	When the right hon. and learned Gentlemantook office, we had a massive public sector deficit of £42 billion. The reason why the deficit had been allowed to run that high in 1992 was quite clear: the Conservatives wanted to win the election. To some extent, they succeeded in winning the election on the back of an unsustainable public sector boom and investment in the public sector. The deficit rose to 5 per cent. of gross domestic product, which was an exceptional figure by anyone's standards. When the right hon. and learned Gentleman vacated No. 11, he left us with a structural deficit—or a deficit at any rate; he never answered my questions about whether it was structural—of £22 billion. During his four years of stewardship of the Treasury, his forecast for the deficit was wrong every year because he overestimated by 100 per cent. the reduction that he actually achieved.
	That was the first matter that we had to tackle in one way or another, and through a combination of factors. The other matter—and it relates to why we made the Bank of England independent, and why the first act of the incoming Labour Chancellor was to show that he had the resolve to face the issue of whether it was necessary to raise interest rates—arose because the Conservative Chancellor, no doubt from sound party political electoral considerations, had refused Bank and Treasury advice to raise interest rates time after time, and month in, month out. Those were the twin matters that we had to address. The incoming Chancellor addressed one of them by taking the courageous political decision and brave economic decision to make the Bank independent. We all know that the present shadow Chancellor said that that move was a mistake, and he even voted against it, I think.

Geoffrey Robinson: The hon. Gentleman is absolutely incapable of distinguishing between a fundamental point and a personal point. He is at it again, trying to imply that there is something wrong about trying to work out policies in opposition. I commend my book to him, as it will teach him how to behave in opposition, which he has not learned yet, as well as preparing him for government. Every party that makes a serious attempt to become the Government of this country does serious work in opposition with serious players, which is one reason why the Opposition have been distinctly unsuccessful on three occasions in gaining the country's trust. People saw through all that they said on immigration at the last election, as they saw through what they tried to do on tax in previous elections. They jumped on an apparently attractive bandwagon, but the wheels came off when they were under scrutiny. With that mind, let us deal with the central issue —[ Interruption. ] If Opposition Members would like to intervene, I am happy to give way.

Geoffrey Robinson: The figures were printed very fully, and the hon. Gentleman will find the £5 billion figure in every relevant part of the documents relating to that time. I cannot see why there is any surprise about that. Everyone knew it then, and everyone knows it now. The figure was in the public domain. To my knowledge, nothing has been revealed, apart from the fact that the Opposition, with the help of some parts of the press, are trying to impose a construction that suggests that in some way the Chancellor personally rejected official advice from the Treasury. Nothing could be further from the truth. As I said a moment ago, and as the previous Chancellor said, a range of advice was available. Of course, officials gave us caveats and warned us of the dangers. They told us the same about the Bank of England, which is no doubt why the right hon. and learned Gentleman refused to make it independent, because he was fearful of what would happen if he did so. Just as we made the hard but correct decision on the Bank of England, so we took the hard but correct decision about the overall reform of corporation tax, which involved the abolition of tax credits. Any notion that the Treasury team or the Chancellor personally went against official advice is plain wrong. I hope that the House clearly understands that.
	None of the excerpts that the Opposition have read out from the official papers delivers the formal burden of official advice that we received, which was that we should proceed with the overall reorganisation of the corporate tax system. The CBI itself—and I spoke personally to Adair Turner—was in favour of the overall reorganisation. In particular, the industry as a whole wanted to get shot of advance corporation tax. If ACT were abolished, tax credits had to go, and if that happened, there was every reason to provide a more balanced and even pattern—a level playing field—of corporate taxation that would not favour dividends, capital investment and retention, still less companies that wanted to reinvest funds that they could not profitably use in their own business. That would be left to the market and not to an invented and distorted tax mechanism that no one ever had in mind when ACT was introduced.
	I come back to the two central points on which I am pleased to base my personal contribution. This is a serious debate, and it should be about a serious problem that the country as a whole faces. I hope that, after this unwanted and unnecessary political intrusion instigated by the Opposition, we can return to the consensual approach adopted by the main parties in the House. The reasons why we made that decision were quite clear, and it was based on the burden of advice from the Inland Revenue and from the Treasury that we should proceed with the changes that we were making. It was necessary, as were the other decisions that we made about the independence of the Bank of England, about raising interest rates and about closing the gap in the disastrous public expenditure levels that we inherited from the Tories. I do not want to rehearse again the specious and fallacious arguments made by Opposition, which were comprehensively demolished by the Chancellor in his major contribution. I hope that the shadow Chancellor will take on board what I said earlier, because in such head-on confrontations, the message that reverberated around the House is that he has some way to go before he reaches the measure expected of a shadow Chancellor. As for us, we stand by those decisions: they were right then, and they are right now. We have problems—let us face them responsibly.

Peter Lilley: It is a great pleasure to follow the hon. Member for Coventry, North-West (Mr. Robinson), whose amiable lack of self-regard enables him openly to admit that Labour deceived the British electorate at the last election. He sees nothing wrong in developing policies in secret, which it refused to admit. As an aside, I got wind of those policies before the election. I held a press conference during the election campaign alleging that it was the Labour party's intention to abolish advance corporation tax. Only the  Financial Times took me at all seriously, publishing a comparatively modest article saying that that was allegedly being considered by the Labour party. No one else paid any regard to the matter, and even I scarcely believed that it really intended to do it. None the less, I shall put in some context the decision that subsequently followed.
	When I became Secretary of State for Social Security, the first crisis with which I had to deal was the Maxwell pensions crisis. The former Labour Member for the Milton Keynes area had left his companies' pension funds bereft of hundreds of millions of pounds, so tens of thousands of pensioners' livelihoods and future were at risk. We had to deal with that—we did not do so, but that is not the issue today. It meant, however, that I had enormous sympathy for my successors when they faced a Chancellor of the Exchequer who introduced a tax that took billions of pounds from the pension system, which affected every pensioner and future pensioner in the country. Indeed, on the night that he introduced that tax, I described it as the Robert Maxwell memorial tax, because no one before the Chancellor had thought that they could get away with removing money from pension funds without anyone noticing until it was too late. That is what our Chancellor did, but he has not got away with it indefinitely—only for too long.
	I want to look very simply at the Chancellor's record on pensions and his reasons for introducing this change. He inherited a system which, in the words of the right hon. Member for Birkenhead (Mr. Field), was the "envy of the world". He inherited an occupational pension scheme that was accepted as the jewel in the crown of pensions systems worldwide. As a result, we were enabled to build up funding, savings and investments for future pension liabilities in this country to a level that was not only more than that built up by any other country in Europe, but more than all the other countries in Europe put together had saved and invested to meet their future pension liabilities. We faced less of a potential burden of tax to fund our future pension liabilities than those countries, and we were generating a huge annual flow of savings, which were available for investment in this country or to acquire assets abroad to meet the burden of future pensions.
	In 1997, when the Chancellor took over, occupational schemes were generally well funded: they were secure, they were growing, they were giving earnings-related pensions to an increasing number of people and they were fairly taxed without disincentives to save. Let us take each of those points in turn and see what has happened under the tenure of this Chancellor.

Peter Lilley: My right hon. Friend is absolutely right. Any fair system taxes money either when it goes in or when it comes out, but not when it goes in, when it is in there and when it comes out again, which is where we are heading under this Government.
	There is another change that no one has mentioned so far, which is the double whammy that this Chancellor landed on the pensions system, namely, the resort to extensive and almost universal means testing. That has meant not only that the pensions system bears more taxes, but that the incentive to save is reduced, particularly for those on middling and low incomes. That will have a serious, long-term deleterious effect on savings and provision for pensions in this country, not least because it means that most providers of pensions are now afraid that they will be acting unwisely if they advise someone who is not very rich to save and invest, which is surely a serious indictment of the situation that this Chancellor has created.
	The Chancellor justified what he did in his Budget speech and subsequent interviews in three ways. First, he said that the measure would increase investment. Figures from the Library show that when the measure was introduced business investment amounted to 10.4 per cent. of GDP—it subsequently went down before recovering again to 10.4 per cent. of GDP. The measure has not raised the level of investment in this country—I will not pretend that the decrease was due to the tax change—and it has failed in the central thing that it was supposed to do.
	The Chancellor said that the measure would discourage dividend payouts. As we all know, dividend payouts follow a cycle, but in the nine years since the measure was introduced, the payout rather than falling has risen compared with the nine years before its introduction. The amount is only small, but the measure has had the opposite effect, if any, to that which the Chancellor proposed and forecast. He imagined that there would be a complex system whereby even though the cash flow of companies would clearly be reduced by this tax measure—there is no way of taking money from companies and pension funds that does not leave them with less—they would none the less invest a higher proportion of a reduced cash flow, which would increase asset values in the long term sufficiently to offset the effect of the money that was taken out. That was an absurd, incredible and complex thesis which I am pleased to say that the Chancellor did not resurrect today, although it will be interesting to see whether his devoted colleague and potential successor will do so in the wind-ups.
	Finally, the Chancellor said that it could all be paid out of surpluses—that these pension funds were awash with money that served no purpose, and that they could pay it out at a rate of £5 billion a year with no harm done. As we have seen, however, those surpluses were available at that time but subsequently disappeared and have been replaced, by and large, by deficits on a fairly substantial scale.

Si�n Simon: Being a socialist, I am a compassionate sort, and I think that Labour Members have been unduly hard on the Conservatives. My right hon. Friend the Chancellor and my hon. Friend the Member for Coventry, North-West (Mr. Robinson), the former Paymaster General, were very mean to the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), and to the shadow Chancellor. The Conservatives should be congratulatednot only those on the Front Bench, but those in the serried ranks of their predecessor generations, of whom there have been rather a lot in the past10 yearson the only successful piece of guerrilla politics in what has otherwise been a sterile, acrid, wasted decade of opposition.
	Opposition day debates on spurious subjects and specious axioms are nothing newindeed, they are the very stuff of these afternoons. It is unbelievable that we are having this debate today, 10 years on, and we can only look forward to the rest of the series of retro-debates. Perhaps next week we could have one on the calamitous independence of the Bank of England and the consequent interest rate crisis, on the disastrous introduction of a national minimum wage and the consequent inflation shock, or on the disgraceful cuts in corporation taxes which accompanied the removal of the pension fund dividend subsidy, thereby causing a sharp, immediately discernible and outrageous rise in investment. Or, with a slightly different flavour, we could debate the consistent reduction of the dividend subsidy by successive Tory chancellorsa gradual phasing out of this market distortion, catastrophically prefiguring its eventual, extremely successful, removal by the Labour Government in 1997.
	When the removal of a subsidy becomes a smash-and-grab raid, we really are in the world of doublespeak and upside-down-think. Even credit is a misnomer when the institutions in question do not pay tax. This was a subsidy, and one that was widely understood to have serious, long-term, structural, negative effects on the level of investment in the economy. Everybody knew that. We knew it when I worked in the global HQ of a FTSE top 10 company in the early 1990s. The dividend was deleterious, but there was no choice because of the tax regime and because of the expectations that it created in the City. Even the Tories knew that perfectly well. Even Norman Lamont, advised by the right hon. Member for Witney (Mr. Cameron), knew it. That is why he said exactly that when he cut the subsidy for the fifth time in 1993.

Si�n Simon: No money was taken out of the pension funds. A previous Government's cash subsidy, which was being given to pension funds but was not advancing their interests, was removed for the long-term benefit of the economy. That was immediately perceived to be successful. That is what happened. The notion that any current problems or changes in the pension industry are attributable to the removal of the subsidy in 1997 is not simply wrong but ridiculous. That is why I am so impressed, as a partisan politician, that the Conservative party has got the subject on the Order Paper an unbelievable decade later.
	Let us consider Kaletsky's column in  The T imes last week. I do not know whether hon. Members have read itnone, strangely, has mentioned it. I commend it to everyone. One of the many comments that he made was that
	the claim that the 1997 'tax raid' was the main cause of pension fund closures, or even an important contributory factor, is simply false.
	As he goes on to explain:
	The fact is that the pre-1997 pensions industry was not remotely as healthy as its lobbyists have claimed. The closure of traditional private sector pension funds was already becoming inevitable because of regulatory changes imposed by successive governments over the previous 20 years.
	We know what kind of Governments they were in the 20 years leading up to 1997, do we not? I do not recall that they were Labour Governments.
	Let us be clear: even it were not for the dotcom crash that wiped 250 billion off the value of the stock market; even if contribution holidaysencouraged by Tory Governments through their capping of surpluseshad not been recklessly overused, and even if life expectancy had not risen so dramatically, there would still be major challenges for the pensions industry because of the serious regulatory changes, which fundamentally altered the landscape of the industry, the implications of which were not properly foreseen or understood when the Tories introduced them.
	Having to pay spouses' pensions, protect pensions against inflation and offer equitable treatment to early leavers had, along with life expectancy, already doubled the cost of providing private pensions. To quote again the esteemed and disinterested Kaletsky in  The Times:
	The last straw... was the Major Government's panic reaction to the Maxwell pensions scandal.
	He finally quotes Stephen Yeo, as several others have done, who advised the Tories on pensions. It is a shame that he did not tell them at the time that the business of getting rid of the subsidy being responsible for a pensions catastrophe was nonsense.
	The Tories know it is nonsense, so what on earth is the motion doing on the Order Paper? To any student of economics or public policy, it would be baffling. To the student of politicsof the cynical, deceitful, disreputable way in which it is possible to practise politicsit is instructive. Hon. Members too often have recourse to Josef Goebbels's line in 1933, which they often misquote and misattribute, that
	any lie constantly repeated eventually becomes the truth.
	It is not a line that fits our purpose here because it is far too strong. Conservative Members have not been lying about the matter, obviously.
	However, the variation on Goebbels's theme that dear old Willie Whitelaw played to the Conservative party conference in 1985, when he said that
	we must never forget the value of constant repetition to get our message across
	is not strong enough because it does not include the implication that it does not matter how misleading or lacking in truthful content the message that the party in question is conveying isall that matters is how often one says it.
	Any young proto-politicians who seek instruction in the worst excesses of the dark arts should note the sheer, dogged, determination, during a period of utter barrenness, despondency and failure, to keep the non-story alive. Looking back through the records, there is quite a roll of honour from the Conservative point of view, though a complete rogues' gallery from the point of view of serious debate about the pensions on which people are obliged to rely often at the most vulnerable time in their lives.
	The right hon. Member for Hitchin and Harpenden (Mr. Lilley), whom I greatly esteem in many other contexts, opened the Budget debate about which we have heard so much in 1997, and claimed that the change in the dividend subsidy, combined with the windfall taxperhaps another potential Opposition day debate, the windfall tax on the private utilities might be a good topic for next week or the week afterwas
	a double whammy for pension funds; it is the Robert Maxwell memorial Budget.[ Official Report; 3 July 1997; Vol. 297,c. 430.]
	In the same year, the right hon. Member for Richmond, Yorks (Mr. Hague) stated that the Budget was
	a double whammy against pensions... It is a smash and grab raid on pension funds in this country.[ Official Report; 2 July 1997; Vol. 297, c. 321.]
	There is double whammy theme. In 1998, the right hon. Member for Horsham (Mr. Maude) wittily reminded us:
	Last year we had the Robert Maxwell memorial Budget, with its vicious raid on pension funds.[ Official Report, 14 July 1998; Vol. 316, c. 198.]
	Vicious? The Chancellor removed a subsidy to stimulate investmentand a year later it is vicious.
	In 1999, the right hon. Member for Wells (Mr. Heathcoat-Amory) told us:
	In the Government's first Budget, there was a 5 billion a year raid on pension funds as a result of the withdrawal of dividend tax credits.[ Official Report, 28 April 1999, Vol. 330, c. 351.]
	In 2000, Mr. Michael Portillo, typically lyrical, stated that
	the Chancellor is still taking 5 billion a year from the pension funds of people who are now saving for their retirement. He is attacking the people who are trying to do the right thing and want to be independent. He is impoverishing future generations of pensioners, driving more and more of them to be dependent on the state.[ Official Report, 13 December 2000; Vol. 359, c. 662.]
	The student should pause at this point and remember that that is not only not true, but ridiculous. Everybody knows that it is ridiculous. The Conservatives know that it is ridiculous. When they were in office, they did exactly the opposite from what they say. However, now they simply keep saying ityear after year and over and over again.
	In 2001, Lord Strathclyde warmed to the theme:
	I cannot think of any tax rise
	it is now a tax rise
	more retrograde than his massive tax raid on pensions savings... How can this assault and battery of prudence be defended?... 'it is like Gordon Brown leading a 25 million Brinks Matt robbery every day of the working year.'[ Official Report, House of Lords, 14 March 2001; Vol. 623, c. 853.]
	That goes on and on, right up to three weeks ago, when the hon. Member for Chipping Barnet (Mrs. Villiers) told us about the famous time when the Chancellor dealt a body blow to savings with what has now become his 100 billion raid on pension funds.
	The Chancellor removes a 3.5 billion to 4 billion subsidy to stimulate investment and it becomes a vicious, 100 billion raid on pension funds. For cynical, self-serving, misleading party politics, I take my hat off to the Conservatives. It is remarkable that they managed to get the motion on the Order Paper without the Clerks rolling about laughing and the printers becoming so hysterical that they could not get the document out.
	However, for serious debate about people's economic security, it is not funny. To call the ending of a damaging 4 billion subsidy, which the Tories were in the process of phasing out five or six times, a 100 billion smash-and-grab tax is not only ridiculous but disreputable. To be so baldly at odds with the facts is not clever, but to scare people about something that can make them feel so vulnerable is not kind. It is for that serious reason that Labour Members will be glad to vote against the silly motion tonight.

Edward Balls: I am grateful to the right hon. Gentleman for giving way again. I am not making an accusation here, because, given the conventions that exist, I have seen none of the pre-1997 papers. I also do not doubt his word that the Chancellor of the Exchequer at that time rejected the case for this abolition. The case had previously been made for a reduction by his predecessor, advised by the right hon. Member for Witney (Mr. Cameron). Did the papers prepared for and submitted to the then Chancellorthe Dorrell reviewcontain a proposal that the dividend tax credit should be abolished, which was rejected by the Chancellor? Or did the right hon. Gentleman himself reject the idea and the background papers? I only ask because those papers have not yet been made public.

Wayne David: It is important to remember the context of the debate. It is undeniably true, and certainly something that is constantly repeated by my constituents, that senior citizens are far better off than ever before. Support for them has been systematically increased by the Government. As we all know, the basic state pension has risen by more than the rate of inflation and a raft of new benefits has been introduced since 1997. Hon. Members will be aware of them. As well as measures on the basic state pension, there is the winter fuel payment of 200 for households with someone over 60 and 300 for households with someone over 80. Free prescriptions and free eyesight tests have been introduced for the over-60s, and the over-75s receive free television licences. As we know, the Pension Protection Fund has been introduced. It is an innovative scheme, the first of its kind in this country. We also have the financial assistance scheme and related measures announced in the Budget. There have been many other measures as well. All those important measures and others have created a favourable situation for elderly people in this country.
	Reference has been made to the dividend tax credit changes that were made in 1997. As has been pointed out time and again today, there was an emerging consensus that that was the way forward. In 1993, when Norman Lamont was Chancellor, he cut the credit from 25 per cent. to 20 per cent. He made numerous statements at the time, but I shall quote just one. In March 1993, he said that the dividend tax credit distorted the commercial decisions of British companies. I believe that that was true then, and remained true until the abolition of the credit.
	A range of economic commentators and professional economists also said that the whole system needed to be modernised, and that the tax credit was outdated and an impediment to investment. I shall quote just one of those commentators. In his widely read and acclaimed book The State We're In, Will Hutton said:
	If the tax treatment of dividends...was changed...then the incentives in the system would be redirected towards tomorrow's profits rather than extracting as much as possible today.
	It was no surprise when, in 1997, the Chancellor of the Exchequer in a new Labour Government announced that the tax credit would be removed. Not only was the action generally anticipated and not only did it represent the summation of a developing consensus that transcended political lines, but it was widely expected in the stock markets. The day after the 1997 Budget share prices increased by 0.45 per cent., and that was not a one-off: the markets continued to respond favourably for some time afterwards.
	We should consider not just the position of senior citizens from 1997 until the present day, but the particular circumstances inherited by the Labour Government in 1997. They may be difficult for us to imagine now. At that time there was still high unemployment, along with relatively high inflation, high interest rates and a large budget deficit. The need to achieve stability and do everything possible to encourage investment was widely accepted in the financial community, and that, I believe, was the rationale behind this and other measures introduced in 1997 and thereafter. Those other measures are also important. It is impossible and wrong to see this measure, which has attracted so much attention in this and earlier debates, in isolation from others introduced at the same time and subsequently. For instance, the Government introduced measures that reduced corporation tax, thus also reducing the burden on companies significantly. That was warmly welcomed at the time, and rightly so.
	The difficulties that arose were not connected, directly or indirectly, with the difficulties that have been attributed to the change in the tax credit. As has been pointed out frequently today, there were other reasons for those difficulties. The fall in the stock market and the dotcom collapse were obviously of tremendous importance, and the reduction of about 250 billion in the market value of occupational pension schemes between 1999 and 2002 was enormously significant. Moreover, as at least some Opposition Members have acknowledged, life expectancy has increased. The 12 years for which a 65-year-old man could expect to live in 1950 have now become 20 years, and it is only common sense to realise that such a profound change in demography will have a profound effect on occupational pensions.

Wayne David: My hon. Friend has identified a moot point. Opposition Members have gone very quiet, perhaps because there is quite a lot in what he has said. It is more than just a rumour or a suggestion; I believe that it may be based on hard fact, and I am sure that my hon. Friend's intervention was based on sound knowledge.
	Some commentators, for whatever reasonI suspect that it is more to do with politics than with economicsappear to have changed their position on this issue. The shadow Chancellor, the hon. Member for Tatton (Mr. Osborne), made a passing reference to Dr. Ros Altmann, although he did not mention her by name. The press have described her as being very critical of the 1997 decision, but I was interested to note that historically her view has been somewhat different. In evidence to a Select Committee back in March 2004, she made some very pertinent comments which were quite different from those attributed to her recently. Let me quote from the verbatim reports of that evidence session of March 2004. She clearly stated that the arguments that some had put forward to test the water were wrong because income was reduced by only about 0.9 per cent. She asserted that that was an insignificant amount. She said that the argument that some had put forward was
	simply trying to make a political point but is of negligible size in this debate in practice. Even if they still had the...relief, there would not have been enough in the funds to pay for pensions. I certainly do not want to be associated with any argument that says this problem was caused by the removal of this relief.

David Gauke: The hon. Gentleman praises the independent and expert advice of Dr. Ros Altmann. Will he therefore tomorrow support the amendments to the Pensions Bill, which are supported by Dr. Ros Altmann, a number of his colleagues and Opposition Members?

Wayne David: The hon. Gentleman knows the answer to that, so he has asked a rhetorical question. I quotedDr. Ros Altmann simply to highlight that commentators need a degree of consistency and that it is wrong to quote people's comments in isolation both historically and in terms of their wider contributions. In 2004 when some of the difficulties that we are alluding to were already becoming apparent, she was clear what the situation was.
	This is an important debate. I am pleased that it is taking place because, sadly, over the past week or so there has been an unprecedented degree of misrepresentation in the newspapers of this country and from many Opposition Members. As we have addressed the details in this debate, the reality has become clear. The Chancellor gave a tour de force in explaining why the situation that we are discussing came about.

Ian Taylor: Obviously, by praising the Chancellor's speech the hon. Member for Caerphilly (Mr. David) is applying to him late in life for a job, perhaps as his Parliamentary Private Secretary. I wonder whether he would have made that same speech so willingly in 1997, when the decisions we are discussing were being taken; would he have stressed the benefits of this change in advance corporation tax that the Chancellor had sprung on the House? It is my contention that at that time nobody knew what its full effect would be. The Chancellor certainly did not come clean about it in the Chamber. It is good that he is now belatedly being held to account, simply because we happen to have the Treasury evidence, which came out after 10 years. The Chancellor's remark that he welcomed the Freedom of Information Act 2000 was one of the most amusing comments that he has made in the Chamber, and I hope that it will be included in future dictionaries of quotations. He clung on to information that some of us had anticipated must have existed in the first placehe legally tried to hold it back until he went on a trip, to Afghanistannamely that he overrode the advice that he had been given and that he knew what the effect of his decision would be, although I suspect that he did not realise how bad it would be.
	There is a pensions crisis, although I accept it is not caused entirely by the particular tax change that is at the centre of our debateI shall come back to that point. There is a pensions crisis because people no longer have confidence in putting enough money aside for their retirement. Not only do they not feel that that is a justifiable saving, but they are unconvinced that the benefits of that saving will flow back to them when they have retired.

Ian Taylor: It is clear what has changed. In 1997 the pensions industry was, according to objective observation, in a good state. Of course, the Maxwell affair raised questions about what might happen, but people did not think that that was generic problem. However, since 1997 60,000-plus occupational pension schemes have closed, final salary schemes are now regarded as too risky, and some people have lost money because of failed schemes or failed companies that fall outside the recently introduced lifeboatwe will return to that when we address the Pensions Bill tomorrow and the excellent proposals that the shadow pensions Secretary and his colleagues will put forward.
	The constituents of the hon. Member for Wirral, West (Stephen Hesford) must be raising concerns. It would be very strange if they were not.  [Interruption.] Well, the hon. Gentleman must live in an extremely affluent and contented constituency, but in the dark reaches of Surrey the natives are restless.

Judy Mallaber: No crime has been committed. That is a ridiculous way of putting things. The statements and analysis given by the Chancellor and others have made the position clear, and they contested very strongly the points made by the Opposition.
	It was unclear from the exchanges between the right hon. Member for Charnwood (Mr. Dorrell) and the Economic Secretary as to what the advice and recommendations were on the relationship between investment and dividend tax relief, and it will be fascinating to read the papers when they are released. I get the feeling that a range of advice was given by the Treasury and advisers from other Departments. It is like what people say about economistsget three economists in a room and one ends up with four opinions. The debate on the advice reminds me of that saying.
	We all know what the debate is actually about. I do not have the polemical flair of my hon. Friend the Member for Birmingham, Erdington (Mr. Simon), who was very up front on this issue, but the debate todaycertainly for those who initiated ithas been about trying to denigrate the economic record of the Chancellor, which the Opposition have not previously been able to challenge seriously. He has been able to see off one shadow Chancellor after another because of the excellent performance of the British economy under his stewardship.
	We have had the longest sustained period of economic growth, with 2 million more people in work and higher incomes for the British people. The unspoken element of this debate is that the Tories want to denigrate the Government's record because their attack has moved from the Prime Minister to the Chancellor ahead of the leadership election. They are determined to damage the Chancellor, regardless of the seriousness and importance of the issues relating to pensions.

Judy Mallaber: The problem is serious and we need to have a proper discussion about the consensus that we want to build in respect of pensions in the future. However, the way that the debate has been initiated means that it cannot offer a serious representation of what has happened. All hon. Members know that constituents are worried about their pensions and livelihoods, both now and in the future. No one denies that, but that is not the substance of the debate. Some serious contributions have been made, but there has been little attempt to give a serious representation of what has happened, and why.
	The debate is an easy hit for the Opposition. Few people understand the complexities of pensions or the workings of the stock market. Not many are familiar with dividend distribution and the nature of investment, the implications of demographic change resulting from rising life expectancy, or the changes in accountancy laws. The issues are complex, and it is easy to claim that a smash-and-grab raid has been carried out and to say, The Chancellor stole your pension. That is the soundbite, but it is not an accurate or sensible reflection of what has happened. The truth is very different.
	When we look back at the relevant documents, I shall be interested to see what they have to say about the relationship between the abolition of dividend tax credit and investment. It has been claimed that the aim was merely to raise money, and the right hon. and learned Member for Rushcliffe (Mr. Clarke) said that the money was to be used for the Government's employment programmes. As I understand it

Judy Mallaber: I am sure that my hon. Friends on the Front Bench will respond to that when they reply to the debate, but my understanding is that the change was made to assist in investmentsomething that I, as a member of the Trade and Industry Committee, consider to be very important.
	However, if it was such a bad thing to remove the dividend tax credit, why did the present Opposition cut it five times when they were in government? I return to a question that I asked earlier. Lord Lamont was Chancellor in 1993: did his special adviser at the time support his statement that dividend tax credit distorted the commercial decisions of British companies? The shadow Chancellor refused to answer. He merely resorted to an easy jibe, claiming that I was asking a planted question. That made me wonder why I bothered to stay up late reading so many articles and newspaper commentariesmany of which blamed our current pensions difficulties on a variety of different factors.
	My right hon. Friend the Chancellor said that dividend tax relief halved under the Conservatives, so we are entitled to ask whether the right hon. Member for Witney (Mr. Cameron) supported the argument that there would be an impact on investment decisions.
	I turn now to the article by Stephen Yeo that has been quoted before. I do not know the extent of his relationship with the Conservative party, as I do not share the great interest exhibited by some of my hon. Friends in such details. However, Stephen Yeo is a partner at Watson Wyatt pensions consultants, and he has said that
	scrapping tax relief was not behind funding problems.
	He added:
	I don't think it is even in the top three reasons.
	I understand that that Opposition Members respect Mr. Yeo and listen to what he says, but he is not the only commentator who does not consider that scrapping dividend tax relief posed serious difficulties for the viability of pension funds. Most of the money gained from cutting dividend tax relief was returned to companies through changes such as the cut of 2p in the pound in corporation tax. The aim was to remove the bias against investment, and to encourage companies to make decisions about future investment based on commercial rather than tax considerations.
	We are forced to return to the question of what the present Government inherited. That is quite nice, because we are usually told that far too much time has passed to allow us to talk about what happened under the previous Conservative Government. We are supposed to have moved on from all that but the Opposition have given us the opportunity to return to such questions, as this debate takes us back to the circumstances of 1997.
	At that time, the UK was suffering from historic under-investment. For every 100 invested here, Germany invested more than 140, the US and France 150, and Japan more than 160. The various measures taken by this Labour Government have meant that we have had continuous growth since 1997. We have managed to cut the historic cost of unemployment by getting people into work and creating 2 million more jobs.

Judy Mallaber: I am coming to the end of my time, if the hon. Gentleman does not mind. We need to look at issues such as increasing take up of pensioners' entitlement. I applaud the work of welfare rights teams and other organisations in my constituency to increase benefits take-up. We need to look at investment decisions and the effects that they have.
	We desperately need a consensus on the future of pensions. I thought and hoped that that was the direction in which we were going, so I have not found today a helpful diversion. We need to look at the future of our pensions system, which was created in conditions very different from today's. Demographic changes have taken place since them. In the past we had different family and working patterns. We were not dealing with the problems of carers, for example, which I talked about in the Second Reading debate on the Pensions Bill. I hope that we can return to a serious debate on those issues, which are complex and difficult, and that we will get away from the back-biting and polemics and move seriously towards the consensus on our future pensions system that we so desperately need.

John Redwood: He did answer. My hon. Friend is quite wrong. He answered from a sedentary position and he said no, he would not be worse off. I have a simple suggestion for the Labour Front Bench. If it is the case in Labour economics that you are not worse off if you take a fifth of your salary away, will they all take a fifth of their salary and give it to the pensioners who do not have enough pension as a result of the policies that the Labour Government have been following? They would find it useful, and obviously the Chancellor does not think that it is very useful to himself.
	The Chancellor said that it would not make him worse off because he knew what was coming next. The second part of my question was, if taking a fifth of his income away would make the Chancellor worse off, would not taking a fifth of pension funds' dividend income away make them worse off? The Chancellor is left trying to argue that it does not make them worse off if the Government take that money away.
	Perhaps the Chancellor does not understand the full power of compound arithmetic. A pension fund is a long-term fund. It may have a life of 50 or 100 years; it depends how long the company goes on making those promises and how long the members and pensioners live before the fund has finished its task. Every year, all those pension funds are receiving 5 billion lessprobably more than that now; the Chancellor will not tell us the accurate figuresowing to the cancellation of the tax credit. It is not just that the pension funds are short of 5 billion a year. They would invest that 5 billion. Given that equities and property have been doing well in most of the years I have been involved with markets, after, say, seven years the 5 billion would be 10 billion because the 5 billion would have increased by 10 per cent. per annum. The funds would have 10 billion more just from one year's dividend tax credit that has been forgone. Then the next year another 5 billion has gone missing; in 10 years time the amount forgone would be perhaps worth treble. So a large amount of money has clearly been forgone by the pension funds.
	We then come to the Chancellor's second very clever argument. He says, Ah, yes, but between 1997 when the money began to be taken away and 2000, stock markets went up. Yes, that is quite true, Chancellor of the Exchequer. So he says, Therefore, no damage was done because what pension funds lost on the dividend tax credit they made up on the share gains. This is where stopping the clock at 2000 is an important part of the trick argument. From 2000 onwards, there was a sharp crash in the market.
	If the Chancellor were here he would say, Yes, but markets around the world fell so it was not just a British problem and it was not a result of my actions. I have looked at the extent of the market falls in Britain and around the world. The evidence is clear that the British stock market fell by considerably more than the New York, Frankfurt and Paris stock markets. All the major markets performed rather better than the UK market. We can make a strong case that the extra decline in the London market reflected the economic policy of Her Majesty's Government, especially the taxation policy.
	I will make a concession. It was not just the removal of the tax credit; another important tax change had quite a big impact on share values and that was the decision to take 22 billion out of the leading sector at the timethe telecoms industryin the form of the auction tax so that companies could carry on trading. That had a huge impact on the share values of Vodafone and BT, which were the leading investments in most pension funds at the time. There was a double effect. The pensions taxthe biggest itemand the telephone tax completely smashed the equity valuations in typical UK pension funds.

John Redwood: I am afraid that the hon. Gentleman does not understand stock markets. On an earnings multiple valuation, the market has not actually risen at all in recent years; all that has happened is that earnings have gone up a bit and the stock market has kept pace with that rise. In real terms, the stock market is well below where it was at the market peak and it has not yet moved on to a higher valuation basis, as it had done before the full impact of the changes was discounted by the market.
	I am not saying that the entire market drop was the direct fault of the tax changes. Quite a bit of it was a worldwide phenomenon; liquidity was withdrawn by central markets around the world, so world markets dropped. The extra fall in the United Kingdom is clearly the result of tax changes in the UK, so the Chancellor's argument for getting out of jail tonightthat because share prices rose for a couple of years all was wellhas to be looked at in light of the fact that what happened next was that share prices fell. Clearly, if 5 billion is taken out of companies' income, their shares will be worth much less.
	I did the sum for the Government shortly after the first Budget. In the Budget debate, I said from the Dispatch Box how damaging the proposals would be. I then made a back of the envelope calculation that they would cost 100 billion. It was an easy sum to do, because in those days the markets valued companies on 20 times earnings. In effect, 5 billion was being taken from company earnings, so multiplying that by 20 meant that there would be a 100 billion capital hit. In practice, the excess drop in the London stock market was more than 100 billion compared with other world stock markets, but that reflects the telecoms tax and other adverse factors that were then discounted by stock markets.
	The Secretary of State for Work and Pensions is shaking his head in disagreement; in the wind-ups it will be interesting to hear his argument as to why taking 5 billion a year from company income does not have a negative impact on values and why one should not calculate how much more the London stock market fell than other stock markets.

John Redwood: Of course conditions changed; the main change was the tax increases that did all the damage. Subsequently, actuaries decided that they wanted to make more provision for longevity, which needed to be paid for.
	There is a certain symmetry in the figures. My100 billion guesstimatea rough guess based on a simple calculationhas been turned into a much firmer figure by people who have made sophisticated calculations. They are trained actuariesunlike meand they say that 100 billion is not a bad estimate of the damage done by the tax changes. The longevity problem created a potential extra deficit, which is being taken care of by the increased contributions. The symmetry is interesting because the cumulative aggregate deficits are about75 billionthey were about 100 billion but the stock market has performed better recently, which has helpedwhich is similar to the figure that many actuaries say would be the discounted cost of forgoing the 5 billion or more of income in the form of the tax credit that is being removed year after year.
	One of the things that Government could do to help the debate is to provide proper information so that we can calculate the figures more accurately. I have often asked them to give me the run of numbers for the imputation tax credits forgone over the past 10 years. I believe that the 5 billion included charity funds, so perhaps in the early days the figure was not 5 billion for pension funds overall, but I suspect that it is rather more now because the distribution rate has gone up, as have profits and dividends, so one would expect the credit to be worth more. I assume that is the reason why the Government will not give me the figures, because if the amount were lower they would want people to know. However, it would be good if they published the run of figures so that we can run proper actuarial figures again, based on the actual figures that the Government can work out from the state of the funds and the dividend incomes flowing into them.
	Funds today have less equity dividend flowing into them proportionately than 10 years ago when this dreadful business started, because many funds have been forced by regulatory, actuarial and other pressures to switch quite a lot of money from equities into bonds, so the figures would need adjusting for that factor, too. When the crisis hit, UK pension funds, quite reasonably, had two thirds or more of their assets in equities. They were growing assets, which, taking the normal run of years, outperformed bonds, but because of the crisis pension funds have now been talked into a much higher bond ratio, at a time when bonds are expensive and yields are low, partly due to the bubble effect of the regulatory pension fund crisis.
	We could now be seeing the beginnings of another crisis in pension funds, because they can no longer make as much on investment gain to get out of trouble as they could 10 years ago before so many of them were switched into bonds. Why are they being switched into bonds? Because the actuarial profession is becoming very cautious and primarily, of course, because so many of the funds are now closed funds. There is a case for saying that we need to be more cautious with a closed fund than with a growing or open fund.
	It is a tragedy that many of our young people will now have no access to final salary schemesand it was an avoidable tragedy. It means that the remaining population of pension funds are being run in a much more defensive and negative way. That means, paradoxically, that they have a bigger problem with meeting future liabilities, because asset growth is less and the calculation of assets versus liabilities is even more unfavourable.
	In today's debate, we have heard estimates of the deficit ranging from 75 billion to 550 billion. That shows that we are dealing with an imprecise science and also tells us that there are different bases for working out the figures. The 550 billion figure was based on the assumption that all the funds are now going to be wound up and annuities purchased through insurance companies based on long bonds. That shows what a difference there is between trusting a bond investment and the 75 billion to 100 billion deficit figure that is based on the assumption that healthy funds can continue and will continue to grow along with growing investments.
	Of course, investment gain is very important in these funds, but it is quite ridiculous of Government Members to try and argue that having 5 billion or so less a year to invest does no harm whatever to investment funds. They need more money and the main reason for that is that the Government took the money away.

Lynda Waltho: I am pleased to contribute to tonight's debate, not least to put some facts and figures on the record that have been ignored so far.
	I am glad that my hon. Friend the Member for Caerphilly (Mr. David) mentioned some of the positive effects that the Government have had on the lives of pensioners since coming to power in 1997, but he missed out a few that deserve a mentionnot least the fact that the basic state pension is now guaranteed to rise in line with prices or 2.5 per cent., whichever is the higher, as we move to increase that pension in line with earnings. Pension credit ensures that no pensioner need live on less than 119 a week from 2007-08 and we have also introduced stakeholder pensions and the Pension Protection Fund, not to mention the financial assistance scheme.
	I apologise for referring to my notes, but there are some figures that I really want to get right. As the Chancellor noted in his opening speech, many of the measures that we have implemented were opposed by Conservative Members, who called today's debate. In 1997 when we came to power, it was necessary to address historic underinvestment and short-termism. The main rate of corporation tax was too high, pension funds had the incentive of encouraging companies to pay out large dividends, which inevitably had an impact on investment decisions. Dividend tax credits alongside corporation tax disadvantaged British-based international companies and an increasing amount of dividend tax creditabout 1.8 billionwas being paid to shareholders other than pension funds.
	Our package of reforms included a reduction in the main corporation tax from 33 per cent. to 31 per cent., as well as the removal of the dividend tax credit, a reduction in the small companies' rate of corporation tax and increased incentives for investment, including increased capital allowances. Those changes encouraged long-termism in the British economy. Abolishing payable tax credits allowed companies to base their investment decisions more on long-term commercial requirements and less on the need to pay high dividends.
	Our reforms encouraged higher levels of investment, helping to account for a rise in business investment. In fact, the figures show that foreign direct investment has risen threefold since 1997 and is now at its highest level since records began. In the quarter after the summer 1997 Budget, business investment grew by 1.75 per cent., then by 6.1 per cent., and then by 7.1 per cent. So between the 1997 and the 1998 Budget, business investment rose by 16 per cent. Since 1997, total business investment has risen by 60 per cent., compared with 34 per cent. in the previous decade. Whole economy investment has risen in every year since 1997a decade of rising investment. In the previous 18 years, investment growth was negative for a quarter of that period.
	The purpose of the changes was, of course, to make companies more profitable and to enable them, by being more profitable, to resume higher contributions to pension funds and to pay higher dividends. Companies were more profitable after tax, as rates of return rose from 13.5 per cent. in 1996 to 15.1 per cent. last yearhigher than ever before. Companies could afford to pay more in pension contributions, which were up 16 per cent. by 1999 and almost three times as much by 2006.
	Funds enjoyed high dividends despite the dividend tax credit change between 1996 and 1999, and even the dividend income of pension funds was higher in 1999 than it was in 1996. Companies did put more money into the pension fund. By 1992, total contributions, less refund, totalled 13.7 billionan increase of 2 billion compared with 1996. Before Opposition Members jump to their feet to say, Give the woman a job or whatever, I want to make it clear that I am very happy being a Back-Bench Member representing Stourbridge and a PPS in the Northern Ireland Officeand I do not want another job.

Lynda Waltho: I do not share the hon. Lady's concerns because I believe that her analysis is incorrect. We cannot have it both ways. Either we analyse what happened in 1997 or compare it with how successful our economy is now.
	Pension fund assets rose by 270 billion between 1996 and 1999. Dividends, employer contributions, employees contributions and total income all rose in 1997 and all were higher in 1999 than in 1996. It was disingenuous of the shadow Chancellor not to acknowledge that, or the fact that pensions were hit by a series of problems after 2000not least the stock market fall that year, which accounted for a reduction of 250 billion in the market value of occupational pension scheme assets between 1999 and 2002.
	Increasing life expectancy, referred to by my hon. Friend the Member for Amber Valley (Judy Mallaber), should also be mentioned. Rising life expectancy obviously means that pensions are in payment for more years, thus increasing a fund's liabilities. Many firms made the decision during the 1980s and 90s, despite rising liabilities, to take contribution holidaysthey were encouraged to do soin the belief that a bullish equity market was a long-term trend. Many funds continued with those holidays after 1997. Indeed, as I mentioned earlier, the Pensions Commission concluded that employers should have increased contributions in the 1980s and 90s, but in fact reduced them.
	I think that the most interesting thing we have heard this afternoon is that, despite having called this debate, the Opposition are not committed to reversing the changes. Time and again, when given the opportunity, they have declined to say they are going to reverse them. Given their record on pensions, even if they said they would, I am not sure whether anyone would believe them. After all, the Opposition have very little credibility on pensions. They presided over the pensions mis-selling scandal, which caused misery to millions, destroyed confidence and seriously damaged the pensions industry in the process.
	The Opposition also presided over a growing gap between poor and better-off pensioners. From 1979 to 1997, the incomes of the best-off pensioners rose by 80 per cent., whereas the incomes of the poorest fifth grew by only 30 per cent. They left 2 million pensioners living in poverty and expected a pensioner in 1997 to live on just 68 a week. Many pensioners could not afford to keep warm in winter, and we all remember the phrase heat or eat.
	Just as the Opposition's record means that they have no credibility, their values mean that they cannot really come up with a coherent plan for their future, or our future for that matter. As a matter of ideology, based on their values, they cannot be trusted to do what is needed to deliver social justice and opportunity. They say they want to tackle poverty and do more for pensioners, but they condemn the increases in public spending needed to do that and call them financially irresponsible. Their so-called proceeds of growth rule commits them to cutting public spending every single year. Their leader himself said:
	As that money comes in let's share that between additional public spending and reductions in taxes. That is a dramatic difference. It would be dramatically different after five years of a Conservative Government.
	If that rule were in place now, spending would be21 billion lower than the Government plan, and lower still in the future. It is impossible to make those savings without hitting pensioners hard. For all the Opposition's supposed outrage on behalf our pensioners, there is no suggestion that they are going to restore the dividend tax creditlet alone match our spending on pensionsyet they have been allowed to get away with their own policy vacuum.
	The closure of occupational schemes was not caused by the decision to cut dividend tax credit. However, we all have constituents who have been affected. That is why I would like to welcome the measures announced by the Chancellor in last month's Budget and referred to earlier. The Chancellor announced that the Government will greatly increase the money available to the financial assistance schemes, to 8 billion in cash terms. The increase will ensure that pensions of all eligible members of affected pension schemes are topped up to a level broadly equivalent to 80 per cent. of their core pension rights accrued in their scheme. The cap on maximum assistance was increased from 12,000 to 26,000. As a result, the number of people helped will be trebled. The Government are also committed to keeping the financial assistance scheme under regular review. I am pleased that more help is going to be provided for people who have lost their occupational pension scheme as part of their company's insolvency.
	That action shows that the Government have listened to the arguments of campaigners and to Members on both sides of the House, and have complied with the order in the recent High Court judgment, and that is another reason why pensionerswhen looking at the policies put forward by the Government and the Oppositionwill see through the crocodile tears and, despite the Opposition's posturing on this issue, will see that they have no plans to reinstate the dividend tax credit, nor to support our measures that have made a positive contribution to pensioners' lives over the last10 years.

Justine Greening: I am pleased to be able to make a contribution to the debate today. I am also aware that many Members still want to make their contributions, so I shall try to keep my comments quite brief. I want to touch on the longer-term impact of the changes that the Chancellor has brought in in relation to occupational pensions and, in particular, I want to talk about young people taking out occupational and also private pensions.
	There is no doubt that the Turner report raised a number of issues about the pensions crisis. It talked about the fact that the sorts of advantages that pensioners currently have will not be enjoyed by people who are pensioners in 30 years' time, and about the fact that the dependency ratio, which we have not really discussed today, is dramatically increasing. It is not just a question of longevity increasing. The reality is that the number of people who will be expected to fund the state pensions is declining in relation to the number of pensioners that there will be. We have some serious problems. Turner pointed out that even if we have what could be called a modest rise in public expenditure on pensions in proportion to GDPgoing from the current 6.1 per cent. to 6.9 per cent. in 2054that would imply a 27 per cent. fall in average pensions relative to average earnings. For us to match the current level of pensions in relation to earnings, we would need to raise the proportion of public spending on pensions to 13 per cent. of GDP.
	Turner's conclusion after all that was that that simply is not affordable, and therefore future pension provision has to involve people looking to their own private provision. That is why the changes that the Chancellor made in his first Budget were so damagingthey fundamentally undermined people's confidence in being able to do that. I want to talk, in particular, about the impact that that will have on younger voters. Twenty-somethings living in Britain today will face a double whammy. Not only will the money that they pay into pensions be worth less because they will disproportionately suffer from the tax takeit will affect the entiretyof their pension contributions, should they choose to make thembut they will be a generation that has disproportionately to fund an elderly generation claiming state pensions, in a way that no generation has had to do in the past.
	There are some serious barriers when it comes to young people and their ability to afford the consequences of the pensions crisis that has been stored up. Unfortunately, the issue goes further than that. For example, earnings have risen in recent years, but the earnings of young people between the ages of 18 and 29 have risen at only a third of the rate of people in the age group above them30 to 39. In fact, 56 per cent. of those who graduated in 2002 are still dependent on their parents for some form of financial support. That is an amazing statistic.
	When it comes to those who will graduate in the coming years, we also know that the financial rate of return on degreesa degree has often been seen as a way of being financially independent and being able to provide for oneself in the short, medium and longer termhas fallen. A study in 2005 by the university of Swansea said that, for some graduates, investing in a degree may have a negative rate of return. That is an important point. For a long time, the Government had a policy of getting 50 per cent. of all young people into university. Some people may have taken a decision on the basis that they thought that it would be financially appropriate, given the rate of return, but it has not been. Not only that, the other aspect is that we know that the average graduate a couple of years ago left with debts of about 14,000, but the average person entering university now will leave with debts of 20,000. It is okay for the Government to come up with schemes such as personal accounts, which are there for young people to use to save, but my point is that aside from young people's lack of confidence in the pension system, they also simply will not have any disposable income to be able to invest in their long-term financial independence. These chickens are in danger of coming home to roost.
	Only last month, the Chancellor raised tax on low earners with no children. Again, those affected will disproportionately be young people. At the very time when we are hoping that this generation will be able not just to provide for themselves in a way that no young generation has had to in the past, but pay for more pensioners than any generation will have had to do in the past, they are having money taken off them by the Chancellor. That is happening not just when they invest in their pension potthey will have to put up with this tax grab for longer than any other generationbut because they are having their income taxed more than it has been in the past.
	It is naive of the Government to think that putting in place new tools will necessarily mean that young people are in a position to use them. There is also the issue of whether many young people today believe that they are contributing to an adequate state pension through their national insurance and tax contributions. The National Consumer Council said:
	Younger consumers are not convinced that they are building up rights to an adequate state pension when they pay tax and National Insurance contributions.
	People fundamentally do not have confidence in the system that they currently pay into. The key statistics show that, whatever the warm words we have heard from those on the Government Benches tonight, what matters is what people in the real world think and their response to the policies that the Labour Government have brought in.
	There are clear-cut statistics that show what is going on with younger people and their pension provision. Let us look at the Living in Britain general household survey, which was carried out by the Office for National Statistics. It shows that in 1995, 40 per cent. of all men aged between 18 and 24 in full-time employment had pensions. By 2003, the figure had fallen to just 27 per cent. We might have thought that given that more women were in the work force over that period, more would have been taking out pensions, but we would be wrong. In 1995, 46 per cent. of women aged between 18 and 24 in full-time employment were saving in an occupational or personal pension, but by 2003 the figure had fallen to 30 per cent.
	The situation was similar for the next age group up. In 1995, 91 per cent. of men aged between 25 and 34 in full-time employment had either an occupational or personal pension. However, the figure in 2003 was63 per cent., so the number of people in this country providing for themselves independently of the state has gone backwards. The situation was similar for women. Back in 1995, 83 per cent. of women aged between25 and 34 in full-time employment had an occupational or personal pension, but the figure had fallen to 66 per cent. by 2003. There are similar statistics for people aged between 35 and 44.
	There has thus been a reduction in people's confidence in providing for themselves, but we also know that people lack confidence in the state's ability to provide for them. We are left with an intractable situation with the result that young people are choosing not to save at all. They are hoping against hope that things will be okay by the time that they retire, although I am sure that many of them would not be able to explain why they necessarily think that that will happen.
	Many young people have seen what has happened to house prices. There have been many negative stories about occupational pensions and we have only to read the papers to find out about the Government's utter dismissal of the parliamentary ombudsman's report and their response to the mis-selling of pensions. People are thus being given the message that they should not trust the Government, especially not this one. When young people think about where they might want to put their money, the message that seems to be getting through to them is that rather than investing in pensions, it would be far better for them to invest in houses, given that that is the way in which their parents have made most money in recent years. All of us in the Chamber know that that is not necessarily a wise long-term investment strategy.
	I am worried that a generation of young people in this country do not think that there is any reason why they should want to invest in a pension. That has been a problem for a long time, and we understand why: retirement seems to be long in the future for young people. However, the steps that the Government have taken have undermined people's confidence in investing in pensions, as is shown by the statistics in the ONS survey to which I referred.
	If young people choose not to invest in pensions, they will end up with no pension provision for themselves and be dependent on the state for support. At the moment, people talk about a grey pound that keeps the economy going, but there is a real danger that people will talk in the future about a grey penny because our pensioners will not be well-off, so they will not be spending money and keeping the economy going, which has been the case up until now.
	The problem is serious. We should not ignore the damage of the Chancellor's change to tax credits on dividends and the dismissal of the ombudsman's report. Young people latch on to that, as well as the lack of confidence and their parents' experience of pensions. Eventually, the effects of what we are doing now will come home to roost. I am greatly worried that we have a Chancellor, who is likely to become Prime Minister, who is so dismissive of this.

Stephen Hesford: Rather like one of my colleagues, I want to treat the debate as what it is. It has been set up by the official Opposition not for a serious discussion of pensions, but as a purely political debate.
	I welcome the hon. Member for Twickenham(Dr. Cable) back to the Chamber. If one were to consider the debate as a prosecution of the Government by Conservative Members, the hon. Gentleman, in what others have called a thoughtful address, acquitted the Chancellor of the main charge. However, he then strangely declared that he would vote with the official Opposition. That is a matter for him, but I suggest that he is taking a populist stance. If there is no conviction, there can be no real support for the Conservative motion.
	Like many hon. Members, I have listened to the debate as it has unfolded. The contributions made by senior Conservative Members were revealing, unlike the sixth-form debating style of the shadow Chancellor. The right hon. and learned Member for Rushcliffe (Mr. Clarke), who has some unclean hands here, was long on rhetoric but short on facts. I suggest to the House that that encapsulates what he was like when he was in office. When my hon. Friend the Economic Secretary to the Treasury forensically probed the right hon. Member for Charnwood (Mr. Dorrell) about what the Dorrell review would have shown, if we had seen the papers, there was a strong suspicion in my mind that the review would have supported what my right hon. Friend the Chancellor went on to do and that the proposal was rejected by the former Chancellor, the right hon. and learned Member for Rushcliffe, on the basis of not argument, but politics. It seemed to me that there was some mileage in the accusation made by my hon. Friend the Member for Coventry, North-West (Mr. Robinson), in his cuddly way, that the right hon. and learned Member for Rushcliffe did not have the guts to take that political decision. The House will want to ponder that.
	We then heard the speech of the right hon. Member for Charnwood. The charge sheet for today's debate is:
	That this House has no confidence in the Chancellor of the Exchequer's handling of occupational pensions,
	and the basis of that charge is the cut in DTC, but the right hon. Gentleman ended up saying that whatthe Chancellor did was, to use his words, relevant at the margins. It seems to me, as it might seem to the House later on, that it is difficult to convict someone of an offence if what they did was relevant only at the margins, even if that were true.
	The next senior Conservative Back Bencher from whom we heard was the right hon. Member for Hitchin and Harpenden (Mr. Lilley). He got himself in a twist by seeming to accept at one point that there was probably no deficit as a result of the DTC cut. If we were relying on that speech to convict the Chancellor of the charge in the motionit is a serious charge, and I will come on to the motion's wording in a momentit would be very flimsy evidence.
	The next senior Conservative figure to make a speech was the right hon. Member for Wokingham (Mr. Redwood). He seemed to take a different tack from the shadow Chancellor. The burden of what he said seemed to be that the Chancellor's decision to cut DTC had had an effect on the stock market. The problem with that argument was not only that it abandoned the main burden of what the hon. Member for Tatton (Mr. Osborne) had been saying, but thatI pointed this out in an interventionif the right hon. Gentleman's logic was right, the stock market could not have recovered under this Government, although it has. It seemed to me [Interruption.] Does the hon. Member for Runnymede and Weybridge (Mr. Hammond) wish to intervene?

Stephen Hesford: The hon. Gentleman is not listening; I said that the right hon. Member for Wokingham was making a different point. He had abandoned the point that the hon. Member for Runnymede and Weybridge just made, and was making the point that the dividend tax credit cut had somehow affected stock market value, and that that was why there was a pensions crisis. So the right hon. Member for Wokingham was making a different point, but what I am saying to the House is that even that point was wrong because the stock market recovered under current conditions. Logically, it could not have done so if the right hon. Gentleman had been correct in his assertion.
	In an intervention on the right hon. Member for Charnwood, I made the pointand the right hon. Member for Wokingham emphasised thisthat the one thing on which no one in the House has been able to agree tonight is the figures that are attached to the alleged raid. I may not have noted all the figures put forward by various Members, but none of the figures that I have heard agree. There has been mention of550 billion, 79 billion, 54 billion and 100 billion, and somebody even put forward a figure of1,000 billion.

Stephen Hesford: I am obliged, Mr. Deputy Speaker.
	We have heard many figures, but not all of them can be right. If someone sought to convict the Chancellor of the serious charge made in the motion, we would expect them to agree on what his so-called smash-and-grab raid has done, but no one in the House tonight has been able to agree on the figure. To carry on with my analogy, if this was an ordinary workaday court rather than Parliament, on the evidence that has been laid before us tonight a judge would have to withdraw the case from the jury, because there is not sufficient evidence that stands up to scrutiny to make a serious case of the sort that the Opposition wish to put forward.
	I said that I would turn to the politics of the matter, and I will. Why are we having this debate? That question has been asked by a number right hon. and hon. Members. We are having the debate on the back of research by  The Times that was taken up by those of a  Daily Mail tendency. The Opposition are being entirely bandwagon-like and opportunistic about the matter. It is not that they had an interest in the subject and so brought it forward; they are running with the subject on the back of that research. There is synthetic anger from Members on the Opposition Benches.

Stephen Hesford: No. That issue is not part of the charge put before the Chancellor, so the hon. Gentleman is making a different point entirely.
	I differ slightly with my right hon. Friend the Member for West Dunbartonshire (John McFall), the Chair of the Treasury Committee, who called the debate hypocritical. I disagree with him on that; it is not just hypocritical, but cowardly. It is cowardly because there would be a possible justification for what Opposition Members say if it was their policy to reverse the decision, but it is not and it never has been. Theirs is synthetic anger because they will reverse the decision, and that is fatal to their argument. Their argument is hypocritical because, as has become clear in the debate, they do not come to the subject with clean handswhat my right hon. Friend the Chancellor did was continue a policy that was started under the Conservative Government, and my right hon. Friend made that point.
	Let us say that a defence needed to be put forward, although I do not think that we have even got to that stage, as my right hon. Friend the Chancellor made a strong case for us when he spoke in the debate. Putting aside party politics, I want to consider, in the cold light of day, what the City makes of the debate. Last week in the business section of  The Independent, Jeremy Warner talked about the fact that the issue had been raised.  [Interruption.] I know that Opposition Members do not want to listen to this, but they may find it just a little instructive. Mr. Warner found himself slightly embarrassed to have to return to the subject. He had, quite properly, been on Easter holiday. He came back and found that there had been a row about the issue, and he found that he was a bit out of the loop. He was genuinely surprised and mystified about why the matter was being discussed. He starts his piece by saying:
	Forgive me for returning to the subject of pension...deficits.
	He talks about the idea of the subject being raised by those of  Daily Mail tendencies, and he uses the word revelation, and puts it in inverted commas. In other words, there was genuinely nothing new that was being discussed. He, an economic commentator, makes a point that I have already made: the anger is synthetic.
	He went on to say:
	I can confidently dismiss the rantings as somewhat exaggerated in view of the story's significance.
	There are many charges, he says, that others may wish to level at the Government but
	destroying the private sector pension industry through a single act of taxation is not one of them.
	That acquits the Government on the central point, and I urge Opposition Members to reflect on it. He goes on to say:
	Nor in truth was the policy as outrageous as it has come to be seen.
	After 10 years, it was a case of dj vu. He said that
	removing the tax credit on dividends was a relatively minor adjustment in policy or even an evolution of it
	I have made that point already
	since the process had begun under the previous Tory Administration as an apparently painless way politically of rebuilding the public finances.
	In the 10 years since the tax credit was abolished, the measure has cost...30 billion.
	That figure is lower than the figures that have been bandied about, but he says that it is a small fractionand this is the point
	of the total liabilities faced by these funds and by no means the biggest contributory factor to the current problem.
	Hon. Members have made that point. He continued:
	Indeed, the tax raid barely figures in the 'Big Three' factors...cited by Stephen Yeo
	who, I understand, was pensions adviser to the hon. Member for Havant (Mr. Willetts) when he shadowed the pensions portfolio
	as the primary cause of the meltdown in final salary pensions.
	That primary cause, I reiterate for the benefit of Opposition Members, is growing longevity, the cost of providing for which is much higher than originally anticipated. The second major factor is lower investment returns, and we have heard about the so-called crash on the stock market. Opposition Members have asked why my right hon. Friend the Chancellor stopped quoting figures at 2000 or thereabouts. He did so because that date delineates the point at which conditions changed. That had nothing to do with my right hon. Friend, and that is the point. In conclusion, this has been a synthetic debate.

Iain Wright: It is a pleasure for me to follow the hon. Member for South-West Hertfordshire (Mr. Gauke), whom I genuinely rate and like. We went through the Standing Committee on the Finance Bill together last year, and he regaled us with tales of Mrs. Gauke. I hope that she is well.
	Last year, I participated in the pensions debate. I followed the hon. Member for Hemel Hempstead (Mike Penning), who is in the Chamber tonight and whose commitment to this issue is not in any doubt, as I think the whole House will agree. I was struck at the time by the Opposition's amendment, which stated that the House should
	recognise the importance of consensus in ensuring long-term, affordable and sustainable pensions reform; and therefore welcomes the commitment of all major parties in the House to engage in the process of consensus building.
	The shallowness of that commitment is clear from today's debate and the antics of Conservative Members, especially Front Benchers.
	The idea that occupational pensions, especially those in defined benefit schemes, were perfect before 1997 and decimated by one single act in the Chancellor's Budgetthe implication of some Conservative Members' contributionsis wrong, misleading and invidious.
	We are experiencing a massive change in the provision of retirement benefits. Much of that is to do with globalisation and the links between Governments, companies and financial markets around the world, much is to do with demographic changes and much is to do with policies that previous Conservative Administrations pursued.
	Companies in the post-1945 period provided an element of security for workers in retirement provision. Defined benefit pension schemes helped inject motivation and loyalty into the work force. That was entirely feasible in the relatively stable environment of the post-war period. The employer bore almost solely the risks associated with planning for retirement through a defined benefit scheme. If a defined benefit scheme fell short, the employer topped it up. Everyone accepts that that has been under severe strain for the past quarter of a century. During that period, some companies have tried to transfer the risk of retirement provision away from them and towards the employee or the Government.
	Moreover, high stock market returns in the 1980s also prompted many companies, as we heard on numerous occasions today, to take pension contribution holidays. According to Inland Revenue figures, employers collectively saved almost 18 billion during the 1990s pension holidays, although employees were, more often than not, forced to carry on making payments.
	The TUC said that contribution holidays have typically favoured employers over employees. It estimates that94 per cent. of surpluses were used to reduce employers' contributions or to give them a contribution holiday, with less than 6 per cent. providing employee contribution reductionsa ratio of 16:1.
	In the 1990s, Unilever took seven years of pension holiday. It also took 270 million out of the then pension fund surplus and put it into its profit and loss account. In the decade after 1992, almost 1.5 billion was taken from its pension fund and almost two thirds given back to shareholders in the form of higher profits and larger dividends. I can envisage people saying, Nothing wrong with that. However, last month, the company announced that it would close its final salary scheme to new entrants. It has failed to provide for liabilities in the long term.
	The general reluctance by firms to hold the balance of risk is predominantly due to demographic changes. That has been mentioned in the debate, though not as often as I expected. The developed world is getting older and that poses daunting challenges. Declining birth rates means that the work force is not being replenished in western Europe, Japan and north America. The ratio of workers to pensioners is getting smaller and that will have a momentous impact on productivity rates and tax levels. That is happening throughout the developed work and I therefore find it odd that the Opposition have not mentioned it in the debate.
	The Opposition's comments imply that only this country is affected by pressures on occupational pensions. That is far from being the case. A recent report by PricewaterhouseCoopers suggests that the state retirement age should be increased to around 70 in Germany and around 72 in Italy to allow state and occupational pensions to continue to be linked to earnings with unchanged contribution rates. PricewaterhouseCoopers also states that further delays will only make the required reforms more painful in the long term.

Iain Wright: I am extremely grateful to my right hon. Friend for that helpful intervention.
	I want to return to the shift away from occupational pensions to private pensions. The emphasis on commission meant that hundreds of thousands of people were persuadedby fair means or foulto leave good, safe occupational schemes and to take out inferior personal plans instead. Well over a million people have received compensation following that mis-selling, largely as a result of measures taken by this Government.
	The crux of the Opposition's argument about the Chancellor and occupational pension schemes seems to hinge on one single act, yet we have heard many times in the debate today that Lord Lamont, as Chancellor, announced a reduction in the dividend tax credit in his 1993 Budget, and carried that out five times. In announcing the reduction to the House in March 1993, he justified it by saying:
	The reduction in the tax credit that I am proposing will therefore have two important effects. First, the payments that lower rate payers, non-tax payers and particularly pension funds get from the Inland Revenue will be reduced by five percentage points, saving the Exchequer no less than 1 billion a year. Secondly, higher rate payers will have to pay an extra 5 per cent of tax on the dividends they receive in order to discharge their liability to tax at the top rate of 40 per cent. This, in turn, will yield an extra 200 million a year.[ Official Report, 16 March 1993; Vol. 221, c. 186.]
	There is nothing there to help the underlying competitiveness of British industry, and nothing to stimulate a shift from short-term gain and boom and bust to long-term investment. It is merely a tax grab of 1.2 billion in a vain attempt to manage the economy following the debacle of Black Wednesday.
	What hypocrisy we have heard today! I hope that, if the Opposition are genuinely outraged at the events of 1997, their Front-Bench spokesman will apologise for the things that happened four years earlier and pledge to reinstate the dividend credit, if they feel that strongly about it. From what I have heard today, however, I do not think that that will happen.

Iain Wright: My hon. Friend makes a good point. This has been mentioned earlier in the debate as well. I was reading Lord Lamont's memoirs in the Library this morning, and I was struck by the fact that, when the right hon. Member for Witney (Mr. Cameron) was employed as a special adviser, Lord Lamont described him as an old Etonian with a taste for the good life. I wonder what that means.
	It is true that the Chancellor in his 1997 Budget abolished tax relief on dividends, but that was accompanied by a range of other policies designed to move us away from short-termism towards stability and encouraging long-term investment. Corporation tax was cut to its lowest ever rate at that time in the UK. The small companies tax rate was cut by 2 per cent., to 21 per cent. There was a doublingwe have not heard about this todayof capital allowances on plant and machinery for small and medium-sized firms so that if companies invested in 1997-98, they could set off against tax a half of their total investment.
	In those decisions made in 1997, the Chancellor laid the foundation for sustained economic growth. That was the conclusion of the International Monetary Fund in the past few weeks in its article IV consultation with the UK, which stated:
	The Executive Directors welcomed the economy's continued economic performance, which they attributed in part to policy frameworks that are responsive to the requirements for sustained strong growth, low inflation, a stable value for sterling and continuing growth of London as a global financial Centre with sound institutions.
	That is not indicative of an economy beset by weak infrastructure and short-term decisions, which is where we were 15 years ago. The blocks are in place for stability and long-term investment decisions.
	However, it is true that more needs to be done. Many of my constituents, who come from a traditional manufacturing area with good occupational pensions, have pension funds in schemes such as Roxby and Expamet. They have saved all their working lives and feel let down by changes and cuts to their planned provision. To tackle the plight of my constituents and others, a consensus is needed between the House, the Government, companies and individuals to ensure that those pensioners who have saved all their working lives in occupational schemes secure the benefits for which they planned. However, the comments and interventions by Conservative Members show that we are a long way from that consensus.
	A key reason for changes to pension provision has been the fluctuating performance of stock markets around the world over the past 15 years. That has been mentioned time and time again. High returns in the 1980s prompted complacency and the feeling that the sun would shine for ever. That obviously was notthe case.
	Between 2000 and 2002, stock markets around the world experienced sharp fallssomething like $8 trillion of assets were lost in the US alone in that period. The NASDAQ dropped to as low as 1,108.49, a 78.4 per cent. decline from its all-time high of March 2000, a result of the bursting of the dotcom bubble, and the Dow Jones lost 26 per cent. of its value between 1999 and 2002you can tell that I am a chartered accountant, Mr. Deputy Speaker. Given the openness of the UK economy and the central position of London in the world's finance markets, it is inevitable that this country would feel the brunt. Between 1999 and 2002, the FTSE 100 fell by 43 per cent., knocking some 250 billion off the value of pension fund assets. Yet pension fund deficits have reduced markedly over the past few years, reflecting the stock market improvement in recent months and years. Last month, Deloitte, a firm that I used to work for, forecast that the total deficit for the final salary pension schemes of the UK top 100 companies is currently 21 billion, with 25 per cent. of schemes now having a surplus.
	The first three months of 2007 have been a roller-coaster ride. In the last week of February, deficits rose by 20 billion in one week as world stock markets fell dramatically. However, a combination of a recovery in the stock markets and a fall in the price of bonds have reduced deficits to a five-year low, showing the close correlation between stock market performance and the health of pension funds. If the Conservative party were determined to secure a consensus on this subject, that close correlation would be recognised.
	I began by saying that providing for retirement is one of the biggest problems facing this country. Difficulties and challenges are being prompted by an ageing population, an end to paternalism, social changes, lower stock market performance and annual returns, and a wish for companies to transfer the risk of retirement away from themselves towards employees and the Government. There was an opportunity for Opposition Members to pledge consensus and seek to find appropriate ways of securing stability and reassurance for pensioners in the face of those massive global changes, but they failed to do that.
	The use of terms such as pension crisis and the wording of today's Opposition motion, however brief it is, further undermine confidence in a pensions system that is still trying to recover from the likes of Maxwell, mis-selling and Equitable Life. As was pointed out by the hon. Member for Putney (Justine Greening), who is no longer in the Chamber, that puts people off. People are reluctant to save for their retirement through pension contributions, believing that it is not worth doing. That will do nothing to help those with occupational pensions who find themselves unfairly caught up in major global forces.
	Today the Conservative party has ignored an opportunity to talk constructively about the long-term future of the country's economy and provision in retirement. Instead, it has focused on distorting history for their own narrow, short-term political advantage. No change there, then!

Hugh Bayley: The hon. Gentleman asks whether it is fair to have a means test, but why did his party have a means test for pensioners? Also, is it fair that the means test operated when his party was in power provided poor single pensioners with a weekly income of 68? Is it not fairer that under our system of pension credit that sum is now 117 a week?

Graham Stuart: The problem with the means test is that too many people are means-tested, and no party has managed entirely to eradicate means-testing.
	The link with earnings was broken in 1980. The Chancellor claimed today that he had brought it back. That was another of his little slips with the truthhe never quite gets it. He has not brought that link back; he has said that if it can be afforded it might be brought back in 2012. Ever since I have been involved in parliamentary politics, I have campaignedas, I am glad to be able to say, has my partyto bring back that link, because it is important that we restore dignity to people in old age. We must minimise the number of people who are forced to rely on means-tested benefits. Because the means-tested benefit has been allowed to grow de facto with earnings and yet the basic state pension has risen merely in line with prices, the number of people who have been drawn into means-tested benefits has increased. The predictions for the period to 2050 are truly horrifying. That is why the House needs to look ahead on a consensual, cross-party basis and find a better way of dealing with our pensions system than we have had in the past, particularly in the past 10 years when this Chancellor has failed. One of the purposes of this debate is that, by bringing the Chancellor's record to account, we can help outline the reality of the position in which we find ourselves today, and when that is properly observed and understood we can move forward on a cross-party basis and find a solution to our pension problems.
	Fairness is the last word that Members or anyone else would wish to apply to the Chancellor's attitude to pensioners. That brings us on to the subject of the Chancellor's character. What sort of person takes advice from industry, independent experts and his own Treasury specialists that suggests that the pension tax would cause great damage to the country's economy and the poorest pensioners and then goes ahead with it in any case? Perhaps only someone with breathtaking arrogance would do that. What sort of person would announce such a change in such an underhand way and seek to cover his tracks so assiduously? I will leave the House to decide on the answer to that for fear of breaching parliamentary language.
	If we cannot expect fairness from our Prime Minister-in-waiting, what can we expect from him? Unfortunately, the answer to that is: more underhand behaviour. Members noted that the Treasury papers came out on 30 March when Parliament was in recess and the Chancellor was in Afghanistan. That chain of events might not have been quite as extreme as another example of a good day to bury bad news, but that clumsy cover-up is symptomatic of the manipulative relationship that the prospective Prime Minister has with Parliament and with pensioners.
	Fairness and openness have been dismissed as qualities that we can expect from the Chancellor if he succeeds to higher office. He maintained todayas he has done since 1997that the removal of tax credit from pensions has boosted investment and performance. The suggestion that taking money away from pension funds was somehow going to boost investment has been commented on by many Opposition Members. Many colleagues have referred to the figures, but it is worth giving the precise figures. When Labour came to power in 1997, business investment was 11 per cent. of GDP. Now, according to the 2006 figures from the Office for National Statistics, it is9.1 per cent. That shoots that particular fox.
	The other fox that has been set runningI do not suggest that it was done on any organised basis, as I am sure that many Labour Members have been sitting up half the night reading thick tomes on the subject of pensionsis the idea that the Conservatives were cutting that tax relief anyway and would have abolished it themselves. However, we have heard the most compelling evidence today from the former Chancellor, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), and from the former Financial Secretary, my right hon. Friend the Member for Charnwood (Mr. Dorrell), that the Ministers in that Conservative Government considered the issues, listened to the representations from Treasury officials and others and concluded that it would damage pension funds and the economy, and that it would hurt those with least. The members of that Conservative Government decided not to abolish that 20 per cent, advance corporation tax or dividend tax reliefwhatever it is called. That shoots the Chancellor's other fox.
	We are debating the Chancellor's handling of occupational pensions. Let us look at what has happened to occupational pensions on the Chancellor's watch, because that would seem the most obvious thing to do, rather than only obsessing about the tax grab. The truth is that more than 60,000 occupational pension schemes have wound up or begun the process of winding up since Labour took office in 1997. Labour Members have suggestedin the peculiar Brownite way of picking dates that do not sound very naturalthat the schemes were all collapsing anyway, but five sixths of the final salary schemes that have closed have done so since 2000. The idea that they were collapsing under the last Conservative Government is entirely false: it has happened on the Chancellor's watch. The pension schemes have collapsed, they have closed to new members. As my hon. Friend the Member for Putney (Justine Greening) so powerfully set out earlier, we have seen the opportunity of a secure old age through their pensions, hope for the future and confidence in those who govern them removed from young people.

Graham Stuart: If the hon. Gentleman had spent more time in his place during the debate, he would not keep repeating points that have already been made. The policies of Her Majesty's Opposition will be made clear before the next election. So many schemes have closed. The destruction has happened, and that may mean that when the next Conservative Government comes in 2009 or 2010 we may have to find alternative ways of promoting saving and encouraging the young people who have lost so much confidence and can see no positive future. However, it is above my pay grade to say exactly what we will do.
	When we consider the record of this Chancellor and Government on occupational pensions, we see that12.7 million UK workers, or 45 per cent., have no pension provisiona rise of 5 per cent. since 1997 or 2.1 million more people. More thoughtful Labour Members will find that a sobering thought. At a time when the economy has broadly done quite wellif not as well as the Chancellor likes to make outand this country has grown richer and had a period of stability, thanks to the foundations laid by the last Conservative Government [ Interruption. ] Ministers may scoff, but when they rest their heads on their pillows tonight, they cannot be proud of the fact that in that timewhich has not been an economic disaster2.1 million more people do not have occupational pensions. Far from growing, under this Chancellor private pension provision has suffered an underlying decline.
	The Opposition have made a strong case against the Chancellor. We have used the evidence provided by many specialists to lay out the figures, but they are not precise: I have repeatedly asked Ministers to give us their estimate of the impact on pension funds of the abolition of dividend tax relief, but it has not been forthcoming. I should be delighted if the Secretary of State for Work and Pensions, when he winds up the debate, were to give us an honest assessment, but I expect that he will refuse to answerjust as the Government refused to give the papers to  The Times until forced to do so.
	We have made the case that pension funds have suffered a great loss as a result of the tax change. Although stock market fluctuations and various other factors have had an effect, we believe that the Chancellor, when he took away 100 billion or 150 billion from the pension funds, inflicted a mortal blowto them, and to people's confidence in them.
	An even more damaging charge against a man who would be kingI am sorry, I mean Prime Ministeris the fact that he never acts openly. For the Chancellor, transparency is an alien concept, and that is what upsets people the most. As many colleagues have said, Governments have to find tax revenue somewhere, but to extract tax in an underhand way that puts at risk the security of people in old age is irresponsible and reprehensible, and renders the Chancellor unfit for higher office.

Philip Dunne: It is always a great pleasure, and an increasingly frequent one, to follow my hon. Friend the Member for Beverley Holderness (Mr. Stuart). He spoke with his customary vigour, both in his main contribution and in his several robust interventions earlier.
	This is a very important debate, for various reasons but not least because it will have an impact on a great many people outside the House. The hon. Member for Hartlepool (Mr. Wright) made a very thoughtful and welcome speech, in which he set out some of the demographic matters that had not been mentioned before. It is a fact that 18.5 per cent. of this country's population are over the age of 65, yet many people, until approaching retirement, have no real understanding of the significance of pension arrangements. Moreover, a great many of the people who have retired have suffered the shock of discovering that their pension schemes have closed.
	As we have heard, more and more people find themselves in pension difficulty as each year goes by. I am especially worried about that, because so many people choose to live out their retirement days in my constituency: 26 per cent. of my constituents are over 65, and the proportion is expected to rise to 30 per cent. by the end of the decade. One reason why I was especially interested to join the Work and Pensions Committee when I came to the House was that, during the last general election, a great many people raised their concerns with me about the pensions crisis developing under this Government. In my constituency, members of pensioner groups and the local Senior Citizens Forums regularly ask me what can be done to put right the damage inflicted on pensions.
	Generally speaking, people have lost confidence in their retirement prospects, but that is not entirely due to the decision to abolish dividend tax credit. I do not intend to argue that that was the sole reason, as the problem has several contributory factorsone of the most fundamental being that the savings ratio has halved over the past 10 years. This is an argument for which the Government take no responsibility, but it is a fact that savings have declined significantly partly because people do not believe that it is in their best interests to save for their retirement.
	Returns from pensions have been cut, as we heard just a moment ago, with the decline in the number of defined benefit schemes. Only a third are now open to new members compared with the number in 1997. The income from final salary schemes is falling across the country. Defined contribution schemes, for all their attractions to the funders, are not expected to provide the same level of income in retirement as the final salary schemes that they replace.
	Another major issue that is having a big impact on people's confidence in retirement has been the threat of means testing. There was a big discussion about that earlier, which I will not repeat. I recognise that a large part of the measures in the Pensions Bill is aimed at reining back the spread of means testing. I welcome that because otherwise, as Lord Turner's report demonstrated, 70 per cent. of the population would be on means-tested pension benefits.
	This debate is important in that it has secured the presence of the Chancellor. My hon. Friend the shadow Chancellor made some important points to tease out of the Chancellor a glimmer of acknowledgement that some share of the responsibility for the problems that have arisen in the occupational pensions sector in the past 10 years could be attributed to him and what he did in the 1997 Budget.
	The debate is relevant not only to the people in this Chamber and not just because the Chancellor has ambitions to succeed the Prime Minister. It is relevant to Labour Members, who have been able to see his reaction and whether he can say sorry, as he was asked to do by my hon. Friend the shadow Chancellor; whether he is able to show some element of contrition and responsibility for the action that he took. I regret to say that there was little evidence of that in his speech today.
	The debate is also relevant following such a long period of denial of the fact that the 1997 decision had any impact on occupational schemes. It is evident from so much external commentary and comments in the debate today that the decision had a significant impact, the scale of which is up for discussion.
	The Chancellor's contribution to the debate will have disappointed many not only on the Opposition Benches but on his own Benches, and most independent commentators. It will have been of considerable concern to my constituents and other people watching from outside the House. It was a disappointing speech from a potential Prime Minister. It was disappointing for the message that he had to give, first, that it was not a real problem, and, secondly, that if there was a problem, it was not of his making.
	The Chancellor's mantra has been that under his stewardship there has been no return to boom and bust. He has mentioned it in every single pre-Budget report and Budget statement since he has had the job. But under his watch in the past 10 years, a large number of defined benefit schemes have gone bust, and two thirds of them have closed.
	Some have questioned why we are raising the matter only now, 10 years after the event. It is perfectly obvious why: we are raising it on the first available opportunity after the evidence was revealed following much teeth pulling from within the Treasury just before the Easter recess. The Opposition are often criticised for not raising the issue regularly in the House and through the media. However, there have been some helpful contributions today, not least from the hon. Member for Birmingham, Erdington (Mr. Simon), who magnificently went through a year-by-year catalogue of the occasions on which this issue was raised by distinguished Members of this House, especially on the Opposition Benches.
	The Chancellor has fought revealing the information doggedly for the past couple of years. He has issued a fog of denial which has enveloped not just himself but most Labour Members. Few seem to have recognised what happened in 1997. We have heard some astonishing tales of denial, with the exception of two contributions from Labour Members, one from the right hon. Member for Birkenhead (Mr. Field), who referred to the double body blowthe first was an attempt to attack the shadow Chancellor but the second presumably related to the precise measure that the Chancellor introduced.
	The other contribution was from the hon. Member for Coventry, North-West (Mr. Robinson). His speech was revealing. He attempted to paint a caricature of my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) when he was Chancellor, but the hon. Gentleman's description could have been that of the present Chancellor. He talked about a Chancellor who was running up high debts, who had a poor forecasting record and indulged in pre-election spending booms. On the Conservative Benches, we recognise all those things as attributes of the present Chancellor. The hon. Gentleman's candid admission that the dividend tax credit was entirely a revenue-raising measure should percolate to other Labour Members.
	I want to highlight two misunderstandings that emerged through the fog on the Labour BenchesI use the word fog to be charitable, but it may have been a deliberate attempt to spin Labour's side of the story. First, Labour Members tried to claim that before 1997 there were five Conservative cuts in dividend tax credit, which were analogous to the Chancellor's decision to abolish the credit. However, that claim does not recognise the fact that the first four cuts resulted from limiting the credit to the basic rate of income tax, which was successfully and successively cut by Conservative Chancellors during the 1980s and the early 1990s. That is not the same thing as abolition of the credit.
	Secondly, several Members criticised pension holidays as a major contributor to the pension crisis. The hon. Member for Amber Valley (Judy Mallaber), who is not in the Chamber, claimed that pension holidays were forced on companies by measures introduced in a Conservative Budget in the mid-1980s. To put Labour Members straight, the purpose of those measures was to stop companies sheltering profits in their already well-funded pension schemes. They were legitimate measures to ensure that profits came into the corporation tax net. As Opposition Members have said, notably my right hon. Friend the Member for Wokingham (Mr. Redwood), the whole structure of trusteeship in the pension fund industry, with independent trustees and reporting actuaries, militates against assets being taken out of fundsother than in the Maxwell case, which was referred to earlier.
	Many Labour Members are confused about the impact of the dividend tax cut on pension schemes. I urge them to go back to their constituencies, as I am sure some will do for the local elections, and talk to their councillors about what has happened to council tax as a result of the need to restore some of the unfunded deficits in council pension schemes. They will get a much better answer if they ask how much the dividend tax credit contributed to the situation.
	In conclusion, there is a degree of consensus on the need to sort out the current pension crisis and on what needs to be done to sort out state pensions and to restore the savings ratio and personal responsibility. However, consensus is best achieved when analysis of the causes of the problem is shared, so it is disappointing that throughout the debate there has been no hint of contrition from the Chancellor or his supporters about the causes of the problem or any recognition that it was of his making.

Philip Hammond: The question before the House is this: given what we know now about the circumstances of the 1997 tax raidthe advice that was received, the secrecy with which it was prepared, the concealment of the effects both during the election campaign and after the eventdo we, in the words of the Leader of the Opposition's motion, have no confidence in the Chancellor's stewardship of occupational pensions, or do we, in the extraordinary words of the Government amendment, note and welcome
	the acts of this Chancellor and Government to...remove the dividend tax credit?
	That is a pretty clear choiceone that millions of savers up and down the country will be watching very carefully.
	What have we heard to help us to make up our minds this evening? My hon. Friend the shadow Chancellor set out the case and asked the Chancellor for a simple thing: he asked for an apology. But what did we get? We got an extraordinary rant from the Chancellor. Actually, it consisted of a speech with no interventions, followed by a series of interventions with no speechpunctuated with all sorts of accusations and assertions. He accused the Tories of not having introduced the Pension Protection Fund before 1997, but there was no need for such a fund before 1997. He told us that auto-enrolment will mean that all employees will have a pension at work, showing that he clearly does not understand the challenges facing the personal accounts agenda.
	The Chancellor then told us that he is looking for long-term answers, but people in this country who believe that their pension is the longest-term issue for them will not understand that comment from a Chancellor who has shattered their confidence in their long-term savings. He told us that because of changes to corporation tax, employers could make higher contributions. That may or may not be the case, but the fact is that they did not make higher contributions. When confronted with the need to make good the deficits, they closed schemes instead, and there was no recognition at all from the Chancellor of the problems faced by the smaller companies, which often do not make profits and do not save corporation tax, that have been at the root cause of the problems faced by the 125,000 unfortunate people who have lost some or all of their pensions.
	The Chancellor told the House that the problems of those pensioners were caused by their employers going bust, but he is quite wrong and obviously does not understand the position at all. Some of those employers have not gone bust and many others have gone bust without causing any problems to the pensions of their workers if their schemes were fully funded. The problem is the underfunding of the schemes, not the insolvency of the employers.
	Perhaps most tellingly of all, we got no apology whatever from the Chancellor. Far from it. Indeed, we got the absolute opposite: with the Chancellor's clunking fist banging on the  Hansards on the Dispatch Box, we were told that if given the chance, he would do it again. Thousands and millions of savers throughout Britain will draw their own conclusions about that statement tonight.
	We heard a very good contribution from my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), who drew the House's attention to the extraordinary fact that the Chancellor, when in opposition, and my right hon. and learned Friend as Chancellor at the time, were considering precisely the same set of proposals and came to completely different conclusions. My right hon. and learned Friend was not prepared to take risks with the security in retirement of millions of ordinary people. He told us how just four sentences in the Chancellor's 1997 Budget concealed the largest tax-raising measure in it. Many of us will remember that Labour Members thought it was a tax cut. It took The Times of the next day to disabuse them of that.
	Perhaps even more thoughtfully, my right hon. and learned Friend challenged the notion that successful and profitable companies should be allowed to keep all their profits and reinvest them in their own businesses. The Chancellor seems to think that that is the way to promote economic growth, but he should know that it leads to misallocation of capital resources. It should be the owners of capital who have the opportunity to decide where to invest it. Indeed, the Chancellor himself, in finally accepting the arguments for real estate investment trusts in the property sector, has acknowledged the truth of that point.
	My right hon. Friend the Member for Wokingham (Mr. Redwood) drew attention to the interesting fact that the FRS 17 has been almost exactly the same size as the estimated cost of the Chancellor's tax grab. He generously described both the Chancellor and the Economic Secretary as having mounted a clever defence of their policies. I am not sure whether that view persisted, however, when the Chancellor answered my right hon. Friend's intervention as to whether he would be worse or better off if 20 per cent. of his income were taken away by saying that he thought that he would not be any worse off if 20 per cent. of his income were lost.
	Then we heard from the hon. Member for Coventry, North-West (Mr. Robinson). We got a lecture on the skills necessary for opposition and a plea to be a bit kinder to the Chancellor. He made the extraordinary case that the mark of a serious Opposition is making policy in secret, locking it up during an election, concealing their tax raising plans, and then releasing them on an unsuspecting British public after that election is over. But at least we got from him a candid admissionnot in the debate tonight, but in his book, which was quotedthat this was simply a revenue-raising measure. It was nothing to do with stimulating investment or promoting business. It was about hitting pensionsa soft touch. He was honest; it is a pity that he could not have been so at the time.
	My right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) made the key point that what matters is not simply the size of the pension funds, which the Chancellor quoted at the House, but the balance between their assets and liabilities. He drew attention to the real problem of trying to stimulate pensions saving in an environment of high levels of means-testing. That is a real difficulty for the personal accounts agenda, which the Chancellor appears not to recognise.
	Then we had a contribution from the hon. Member for Birmingham, Erdington (Mr. Simon), who asked why we had raised this subject for debate now. Did we pluck it out of thin air? Apparently he has been on holiday for the last couple of weeks and is not aware of the dramatic release by the Chancellor on 30 March of the hitherto secret documents.
	Until 1997, Britain had arguably the best pension provision in Europe and now it has arguably one of the worst. Part of the reason for that is the Chancellor's 1997 tax changes. Ministers deliberately concealed the impact of the annual tax raid, both before and after the event, and have consistently denied that wiping100 billion or so off the value of pension funds has had any negative effect on pension provision. The Paymaster General, who was then the Financial Secretary, said in July 1997:
	our reforms will benefit pension funds.[ Official Report,3 July 1997; Vol. 297, c. 508.]
	The then Secretary of State for Trade and Industry told us that the reforms would be good for pensioners. The Chancellor himself reassured the country, saying:
	We are not raiding pensions, that's just ridiculous.
	But a decade later, with the benefit of these documents, we know the extent of the Chancellor's reckless disregard of the warnings that he received and his shameful gambling with the future retirement security of millions of ordinary people. We know that only because of the freedom of information request made by  The Times. The Chancellor told us that he welcomed the information coming into the public domain and he claimed credit for introducing the Freedom of Information Act 2000. So why for two years has he spent our money fighting the release of the papers that  The Times requested, saying that their release would damage the process of government?
	Suddenly, when the damage to the Chancellor's own career progression seemed to be more at risk, the damage to the process of government faded into insignificance and out the papers cameon a Friday afternoon, after Parliament had risen for the Easter recess, when the Chancellor was safely abroad engaged in statesman-like posturing in Afghanistan. The Economic Secretary, whose hands are far from clean in this matter, was left to defend the indefensible. Tonight, we are faced with the even more ludicrous spectacle of the Chancellor's position being defended by the Secretary of State for Work and Pensions. I would repeat his comments on the Chancellor's fitness for the highest office, except that you have previously ruled that they are too unparliamentary to be quoted in the Chamber, Mr. Speaker.
	The Chancellor knew from the outset that his position was untenable. That is why he resisted for two years releasing the papers and why he released them only when Parliament was in recess and when he had put 6,000 miles between himself and this place. Labour deceived the electorate in the 1997 election into believing that it was committed to no new taxes and the Government concealed the effect of the changes after they had implemented them.
	When the whole story came out on 30 March, the Economic Secretary and the former Paymaster General engaged in a predictable series of ducking and weaving exercises in the Chancellor's absence. First, they said that this was all done on the advice of civil servants, but the documents released proved that that was not the case. They then said, Actually, the CBI told us to do it, so that's all right, until up popped Lord Turner to say that that was completely wrong. Despite a few mumblings off in private, I have not heard any Government Minister say in public that Lord Turner was lying, so if that is what the Government want us to believe, perhaps someone will jump up and say so.
	The hon. Gentlemen then claimed that the whole package stimulated business investment, but business investment has fallen as a percentage of GDP [ Interruption. ] Yes, it has. The Government then said, The Tories did it, but there was a world of difference between the adjustments that my noble Friend Lord Lamont made to dividend tax credit and the wholesale abolition that the Chancellor undertook. I remind the Chancellor that my right hon. and learned Friend the Member for Rushcliffe had taken the decision that no further cuts in dividend tax credit were appropriate or possible.
	The facts are that the pension tax raid was the Chancellor's decision, that it was taken against the advice of his civil servants, the CBI and the Prime Minister, and that it was not an adjustment of rates, but a carefully planned and executed raid that totally abolished dividend tax relief for pension funds. Even after taking the corporation tax changes into account, the raid resulted in a net gain to the Treasury of 3.5 billion. It did not deliver increased business investment, it did not boost productivity growth and it did not help any of the other fundamental drivers of prosperity in our economy.
	I readily recognise that the Chancellor's tax grab was not the only factor affecting pensions, but it was the factor over which he had direct control. The end result is that Britain's gold standard pension system has been reduced to ruins. Some 60,000 schemes with 1 million members have wound up since 1997. Over the same decade on the Chancellor's watch, final salary schemes, except those in the public sector, have lurched into terminal declineless than 10 per cent. of the private sector work force now have access to them. More than 100 billion has been wiped off the value of pension funds and more than 7 billion of annual cash flow is now being sucked into the Chancellor's coffers.
	For the 125,000 people whose pension schemes have failed with insufficient funds to pay them what they are due, the crisis is not a future problem, but something that is real and immediate. The Chancellor has turned his back on those people, which was why my hon. Friend the Member for Tatton (Mr. Osborne) today outlined the measures that we will propose with cross-party support in the House [ Interruption. ] The measures are supported in all parts of the House, except the Government Front Bench. They represent a consensus around the moral and pragmatic case for delivering proper benefits to that group of victims.
	The truth is that the Chancellor thought that he could get away with it. He thought that as long as the dot.com bubble lasted, no one would notice 100 billion or so. He gambled with the future retirement security of millions of ordinary, hard-working people. When the bubble burst and he lost, they were left to pick up the tabthey will not forget that.
	The debate is about the Chancellor, his judgment and his operating style. We have heard how he plotted his tax raid in secret, how he ignored the advice of everyonecolleagues, civil servants and the Prime Ministerhow he dissembled about the effects of his 1997 announcement, and how he has tried to deny the consequences and suppress the evidence ever since. Finally, we have heard how he tried to bury bad news when he could no longer keep it hidden in the Treasury.
	Tonight, the question and the motion on the Order Paper are about the Chancellor's handling of occupational pensions. However, he knows that the question on the lips of millions of pensioners and savers throughout Britain goes wider than that. The House has a choice: it can express its solidarity with the millions of people whose pensions have been affected, or it can turn its back on those people and vote for the Government's whitewash amendment, which actually praises the decision to scrap tax credits. We can reflect the huge concern across Britain about what has happened to our pensions, and about the Chancellor's role in that regard, or we can turn a deaf ear to the questions that are rightly being asked about the judgment and the style of the man who aspires to the highest office in the land.

John Hutton: First, I congratulate all my hon. Friends, who made excellent speeches in the debate. I will come to their speeches in a second. We heard two interesting things from the Opposition Front-Bench spokesmen today.  [Interruption.] No, they were interesting. I was here for all of the debate, and I counted two interesting things. The first was that, according to the hon. Member for Runnymede and Weybridge (Mr. Hammond), the Conservatives did not cut the dividend tax credit; they simply adjusted it. I think that we will keep a close eye on that type of rhetoric, and perhaps we will find that it applies more widely when we come to consider their record in Government.
	The more substantive point that the Conservatives made, which we Labour Members completely and totally reject, concerned the idea that my right hon. Friend, who has done a superb job as the Chancellor of the Exchequer, was, in any way, shape or form, not straight or honest about the changes that he made in the Budget in 1997. That is a charge that we completely and totally refute.

John Hutton: I am grateful, Mr. Speaker. The problemand it is a problem not just for the right hon. Member for Charnwood but for all the Opposition Members who spoke in the debateis that the logic of his speech is that he would reverse the changes to dividend tax credit. That is the one policy that we all waited to hear about today, but we did not hear it. It was conspicuous that in the speeches of Opposition Members [ Interruption. ] There is no point in their trying to barrack me and make their speeches again, as they had an opportunity, which they completely fluffed. It is evident to everyone watching the debate that the Tories have no policy to address the problem that they have spent the past six and a half hours describing in detail to the House.
	Opposition Members have had plenty of time to make their position clear. We made those changes to the tax regime 10 years ago, and there have been two general elections in the intervening period. Just to remind them, we won those general elections because of the stewardship of my right hon. Friend the Chancellor and because of the way in which we have governed the country. After two general elections and 10 years of waiting, there is still no hint of a Tory policy and no commitment to reverse the changes about which they have complained. This has been one of the worst performances by the Opposition that I have witnessed in my time in this House.
	According to Conservative Memberswe heard this throughout their speechesthis Government supposedly inherited one of the best pension environments in the world in 1997, which explicitly underpinned most of what the right hon. and learned Member for Rushcliffe said in his speech. The only problem with that argument is that the facts tell a different story. In 1997, nearly3 million pensioners were living in poverty. Many women were denied the opportunity to secure a full basic state pension in their own right, and carers were similarly mistreated by the system. It was no golden age of private pension schemes, either. The mis-selling of private pensions, which was overseen by the previous Government, many of whose members are still here today, was a national disgrace. Millions of workers had no access to occupational pensions. That was no utopia.
	We need to be clear about one more thing, too. As my right hon. Friend the Chancellor has said, the shift from defined benefit schemes towards defined contribution schemes is not a UK phenomenon brought about by changes to corporation tax. Far from itas the Chancellor and many Labour Members have made clear, the effects of demographic change have impacted on pension schemes and systems right across the globe. My argument today is that this Government have acted properly and responsibly in meeting the challenges that our pension system has faced since 1997.

John Hutton: I am sorry, but I cannot remember what the right hon. and learned Gentleman was saying at the beginning of his intervention. The changes were part of a series of reforms to corporation tax that were designed to address what many people, including the Conservative party when it was in Government, had identified as a distortion in the tax system. The Conservative Government made their five separate adjustments to dividend tax credits, but the point of my right hon. Friend's reforms was to make sure that we could then go further and cut corporation tax. They cut the dividend tax credit, but they never cut the main rate of corporation tax, which is the problem that the right hon. and learned Gentleman must address.
	I have only two minutes left, and everyone will be glad to know that the remaining 12 pages of my speech will probably never be heard in this House.  [ Interruption. ] Having read them, that is probably a good idea. In conclusion, the Opposition have made a lot of the process and also the policy behind the changes made by my right hon. Friend, but we have still not heard the Conservative response to any of those changes, and I have a very strong sense that we will never hear it.

Phil Willis: I expect that you, Mr. Speaker, and I were fortunate when we were growing up some 50 years agowhen we were both teenagersin that the need for financial education was limited. The only problem that my family had with finance was managing until the next payday. Credit cards, individual savings accounts, overdrafts, student loans, annual percentage rates or even mortgages were as remote as they were irrelevant. I am glad to see that the hon. Member for Dewsbury (Mr. Malik) is in his place, as he is from Burnley, where I grew up.
	Financial education, as taught by my father, consisted of the simple philosophy of Mr. Micawber:
	Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
	Today's young people face a more complex financial picture. They live in a country where last year 107,000 people became insolvent, 5,300 people a day went to Citizens Advice for debt advice and our combined consumer debt reached 1.3 trillionmore than our GDP.
	It appears that as we have become more affluent we have abandoned not only the philosophy of Mr. Micawber, but our senses when it comes to finance. Right hon. and hon. Members will have dozens of examples of constituents who are in dire financial situations, often through an inability to budget or to understand financial products, and a failure to comprehend financial terminology. That is hardly surprising. An ifs School of Finance survey in 2004 revealed that 79 per cent. of people did not know what APR meant, 30 per cent. did not know what a standing order was,20 per cent. could not understand the concept of inflation, and 50 per cent. did not know what 50 per cent. was.
	Inevitably, that lack of financial knowledge is especially prevalent in the young. A Finance Society survey in January 2007 found that most youngsters thought that an ISAan individual savings accountwas an iPod accessory, and that winning the lottery was the best way to fund retirement.
	I am sure that no one in the House would dispute that people need to be better educated financially, or that that education should start in our schools and colleges.

Phil Willis: The hon. Gentleman makes my point exactlythat young people's inability to understand simple terminology is a serious problem. To be fair, the Government's 2007 publication entitled Financial Capability: the Government's long-term approach said that all children and young people should
	have access to a planned and coherent programme of personal finance education, so that they leave school with the skills and confidence to manage their money well.
	Most people would agree with that, but the reality is that financial education is a lottery for the vast majority of our young people. Until it is recognised that financial education is a key skill that should sit alongside literacy, numeracy and ICT as a stand-alone element in the national curriculum, it will remain a lottery, and the nation will continue to regard financial illiteracy asthe norm.
	Sadly, the Department for Education and Skills does not agree that a stand-alone element is needed. Indeed, on 17 February my hon. Friend the Member for Falmouth and Camborne (Julia Goldsworthy) asked the Minister for Schools whether he intended to bring forward proposals to introduce a compulsory study of financial literacy in the national curriculum. The Minister said that he had no such plans, and I want to ask him why. The Government have stated that they are already delivering personal financial education through personal, social and health education, enterprise education, citizenship education and, from 2010, GCSE functional mathematics. However, like many others interested in these matters, I remain unconvinced that those initiatives, either alone or combined, are sufficient to equip our young people with the skills needed to manage their finances. I shall explain why.
	First, Ofsted says that many secondary schools are failing to teach PSHE at all, and that only a handful of the ones that do include personal finance. Even then, the amount of time devoted to the subject is minute. The Government are considering adding an element of economic well beinganother Eto the PSHE course, yet that will not improve matters. The new programme will be known as PSHEE but, like the existing programme, it will be non-statutory and non-examinable. In other words, it will simply be optional.
	What about enterprise education, which is supposed to ensure that all 14 to 16-year-olds have five days enterprise activity? I welcome wholeheartedly the commitment to work-related learning, but it is related only tenuously to personal finance skills. Again, the amount of time allocated specifically to personal finance education will be very limited andcruciallywill also be optional and non-examinable.
	So what about the citizenship programme? The Government claim that that includes financial education, but once more there is little evidence that schools are offering any form of financial education in the citizenship programme. I welcome the fact that financial capability appears in the suggested syllabus, but many schools do not teach it at all. The citizenship programme may be compulsory, but financial education is not a compulsory part of it, as it clearly needs to be. Even the examinable GCSE short course in citizenship contains no questions even vaguely related to personal finance.
	Earlier today, I double-checked this by reading the specimen exam papers from OCR and Edexcel, neither of which contains this year a single question relating to personal finance. That cannot be right. The Education and Skills Committee concluded last month in an excellent report on citizenship that it is poorly taught and patchy at best. With ever-increasing pressure to deliver greater concentration on elements of identity, diversity and belonging, I fear that citizenship will fail to provide a sound vehicle to deliver core financial skills.
	So what about functional maths? Ministers have stated that the new functional maths GCSE, to be introduced in 2010 will include elements of financial capability. In evidence to the Treasury Committee published in November 2006, the ifs School of Finance expressed its concerns that the standards for functional mathematics published by the Qualifications and Curriculum Authority were inadequate. The Select Committee concluded:
	What is being masqueraded as financial capability is confined to recognising notes and coins and simple calculations using money.
	That is not financial education. Regrettably, it would appear that this latest Government initiative offers little other than a tasty soundbite but no real substance. Indeed, if I could make one plea to the Minister tonight, it would be to move away from the idea that maths is a natural home for anything relating to personal finance. Financial capability is first and foremost about behaviours, not about numeracy.

Phil Willis: I certainly do agree. I will come on to that point in just a second.
	Of course, in looking at all the Government's financial education policies in the round, I am concerned that there is little if any evaluation of financial education programmes in our schools. Unfortunately, time will not permit me to elaborate, but I wish to alert the Minister to concerns raised in the Government's own report Financial education: a review of existing provision in the UK published by the Department for Work and Pensions in 2005. The report stated:
	Our review found that little formal measurement of the quality of financial education teaching
	a point that the hon. Gentleman made
	is taking place through Ofsted or any other inspection mechanism. Formal measurement is likely to reduce further with the new Ofsted inspection regime starting in September 2005.
	That is quite a damning comment.
	Sprinkling personal finance across the curriculum has done little to improve financial capability and there is little evidence to suggest otherwise, so it is time for a different approach. Academic evidence from Tennyson and Nguyen published in 2001 and from the university of Manchester in 2006 suggested that a specifically designated course in which students know that its total aims relate to areas of financial management is more effective than courses that cover a wide range of areas.
	The Manchester university report provides powerful evidence of the effect that financial education can have on behaviour and young people's lives. It found that the majority of young people taking a stand-alone financial educational qualification had made positive changes in the way in which they managed their money. Many changed to a different bank account; many looked for additional, non-traditional products such as mini cash ISAs and were fully equipped to handle their money when they went off to college or university. Ninety-five per cent. of students said that they were better able to manage their finances as a result of taking a dedicated stand-alone personal course.
	A further benefit of stand-alone qualifications is that we know whether any learning has taken place and thus whether changes in financial behaviour have occurred as a result. I cannot emphasise enough to the Minister that it is essential that any actions to improve financial capability are measurable. The simplest, most cost-effective way of doing so, which is most informative in terms of the data produced, is to offer a course that requires accreditation. I accept that schools will say that it is yet more to fit into a crowded curriculum, yet more than 100 schools are already doing the equivalent of a GCSE course sponsored by ifs School of Finance. If they can do it, we need to be able to do it in the schools where students will benefit the most.
	Almost every aspect of modern life in the UK involves some form of financial transaction, irrespective of our income, class, background or academic ability. Finance impinges on everything we do so it should be taught as a stand-alone component of the curriculum. I acknowledge that there are some excellent initiatives in financial education that deserve the highest praise. I fully accept that some schools are working within the Government's overall programme and delivering high quality. Initiatives such as the learning money matters programme funded by the Financial Services Authority, in which Personal Finance Education Group employees offer teachers support via e-mail, telephone and personal visits, are super.
	I welcome those small steps, but it is really the role of the DFES to equip teachers with the skills and confidence to teach the subject by introducing a personal finance element in teacher training programmes. At present, there is no such element in any of those programmes. Maintaining the current approach and pursuing the path set by the Government for the next 10 years will not deliver the objective we seeka financially literate society. I hope, however, that the Minister will at least reconsider functional maths in relation to personal finance. I hope that he will carefully consider the Select Committee report on citizenship in relation to financial education and that he will examine the possibility of incorporating an element of financial education in all teacher training programmes.
	Finally, I make a simple plea to the Minister. Will he look again at the evidence that supports making financial education a compulsory part of the national curriculum? Will he talk to the FSA, the ifs School of Finance, the Institute of Chartered Accountants, the Finance and Leasing Association and the Council of Mortgage Lenders? Look at the evidence, Minister, and make new plans.